How do you price these types of properties, in the current market? I know that some use the income approach and also comps, is this correct? I tried the income approach but in this market the comps are much lower than the numbers using the income approach.

Thanks in advance.

Single family 1 to 4 units (single unit,duplex,tri-plex,quad) all fall into the residential category.

For appraisal purposes the sales approach method is used.

When you get into 5 units and above more weight is put on the income approach.

You have to assess the deferred maintenance with the property and the occupancy levels.Have they been constant at 80% for 6 months or longer?? Are occupancy levels going up or down?? Did the owner waive security deposit or give free rent concessions to lease it up and the NOI is much lower??

Does the seller have schedule E tax returns to prove income??

Typically you run numbers this way:

Property management 10%
Operating and expenses 30%
Vacancy 10%

So if you have provable gross rents of say 100,000 over time 50% off of that would be 50,000 NOI.At a 10% CAP you have a value of 500,000.

Numbers will vary some by area so this is not set in concrete.Personally I like selling in the 5 units and above space.

Remember even if the seller self manages and cuts corners to increase NOI that the buyers lender will base NOI off of their assumptions if they had to foreclose and take back and run it themselves.

Also when listing for sale many potential buyers might be out of state or the county and will not run it themselves.When they deduct property management fee the returns and offer price will be lower.

Hope it helps.