How to Evaluate Apartment Properties
When you are in the process of buying an apartment complex and identified one that you feel it is right for you, the next step is to find out its real worth by finding out the price you can pay for it.
You can get a good deal by paying the lowest possible price for the apartment complex and for this you should know how to evaluate the property. One way is to use the Gross Rent Multiple in which all the annual rent receivable in the property and multiply it by 9 or 11 to get the low and highest range for the value of an apartment building.
Another method is to use the CAP rate in which the price of the property is divided by Net Operating income from the building to get the CAP rate for the building, and from this, we can find the profitability of the building by looking at the cap rate in %. This will give what percentage of the investment you will be able to realize a return on buying this property.
Like this, there are several ways to calculate the amount of money you can get back on purchasing the apartment complex. You should evaluate this carefully and take the Buy decision if the evaluation gives a fairly satisfactory return on your investment.