Multi-Unit Apartment Buildings

Real estate investment is one of the best ways to grow wealth and multi-unit apartment buildings are a great income-producing investment for a number of reasons.  Demand for units by renters is increasing while at the same time the cost to build new multi-unit properties is prohibitively expensive for developers.  Exposure to vacancy risk is mitigated in properties with more units as a single vacancy represents a smaller portion of expected income.

 

How Multi-Unit Apartment Buildings Are Evaluated

In Ontario the Municipal Property Assessment Corporation (MPAC) determines market cap rates for each region by property type through market analysis.  Then a median cap rate is established for each area and property type*.  An individual investment property of that type is valued by dividing the net operating income for the property by its regional market cap rate.  This means that the profitability of multi-unit apartment buildings determine their value.  Small changes to the income or expenses for a building have a large impact on their value.

 

The Importance of Accurate Property Analysis

When working with a client who is selling a multi-unit property I recommend specific steps that can be taken in order to optimize the performance of the building to prepare it for market.  This can have a significant impact on sale price.

For my clients who are interested in new investment properties I look at the details that are not presented by the seller to establish the true value for a property.  Often issues such as tenant quality or hidden expenses can be missed and drastically change the expected return.

*For details on how MPAC determines market cap rates for multi-unit properties see: https://www.mpac.ca/sites/default/files/imce/pdf/Multi-Residential.pdf

image of multi-unit apartment building
32 Moira St. - A 12 unit building in Belleville
Tom McEvoy

Tom McEvoy

Sales Representative
CENTURY 21 Lanthorn Real Estate Ltd., Brokerage*
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Blog

September Investor - Preparing your Multi-Family Property For Sale to Achieve Maximum Price
July Investor - Cap rates for Multifamily Buildings
Multi-Family Value-Add Investing
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