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
32 Moira St. - A 12 unit building in Belleville
CENTURY 21 Lanthorn Real Estate Ltd., Brokerage*
441 Craig Rd, Tyendinaga, ON K8N 4Z6
302 Front St, Belleville, ON K8N 2Z8
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