# How to Calculate the Value of a Multi-Unit Property

## How to Calculate the Value of a Multi-Unit Property

A multi-unit property is a building with separate housing units that are available for residential inhabitants. There are various forms of multi-unit properties, such as duplexes, quadruplexes, and townhomes, but the most common is an apartment building. Multi-unit properties are designed to house families by giving them separate units that are clustered in one structure.

If you own a multi-unit property, calculating its value is not a difficult task. All you need is the operating data. The NOI (Net Operating Income) is an important inclusion for the calculation of the value of the property. This is because the computation will derive from an income approach appraisal. NOI can be obtained by subtracting all the expenses from the gross income generated by the property. These expenses usually include management, landscaping, taxes, repairs, insurance, and maintenance.

The next important thing to consider is the capitalization rate. We need to divide the NOI using the value of the capitalization rate to come up with an accurate market value. Capitalization rate can be determined with the help of brokers, lenders, and appraisers. They are expected to know the market cap rate, which is the average of the cap rates for properties with common characteristics in one specific region. These cap rates are computed by dividing the purchase price with the NOI; variables that are presented upon purchase.

When the NOI and the capitalization rate are finally known, you can start calculating the market value of a specific multi-unit property by using the following formula:

Capitalization Rate/ NOI = Property Value

For example, if the capitalization rate is 7.5% and the NOI is \$330,800, we will have the following equation:

\$330,800 / .075 = 4,410,666.67

Property Value = 4,410,666.67

It is important to note that these variables are not constant. You should be able to understand how they work together to quickly come up with an accurate market value. Once you have the accurate operating data and accurate information from the real estate experts, computing the market value of a multi-unit property is just a calculator away.