Moses Kagan on Real Estate

How much is my apartment building worth?

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The short answer is, if it’s in Los Angeles, its probably worth more now than it has ever been worth in the past.

Why?

Because everyone with cash and a brain is sick of getting 0.01% interest in his/her checking account and is therefore chasing yield by buying buildings, because even a so-so deal on a building is going to generate 3-4% / year, (hopefully) with room to appreciate.

But what does that mean for you, dear apartment building owner?¬†Well, let’s give you some rough numbers:

First, take the total monthly rent you collect from your building. If you live in one of the units, add to that total rent a fair estimate of what your unit would rent for on the open market if you moved out.

Now multiply that total rent number by 12 to get the total annual rent. With me so far? Now multiply the annual rent by 10 – that’s the lower end estimate of what it’s worth. Now multiply the total annual rent number by 13 – that’s the higher end estimate.

For example: Say you own a fourplex with four identical units and you live in one of the units. Say the other three units each rent for $1500 / month. Your total monthly rent is $1500 x 3 = $4500 + $1500 for your unit = $6000. Now multiply $6000 x 12 = $72,000. Your building is worth between $72k x 10 = $720k and $72k x 13 = $936k.

I recognize that’s a pretty broad range of values. The reason it’s so broad is that all buildings are different. A renovated building in Silver Lake with rents which are a bit below market easily hits that 13x number (and probably goes past it). A disaster in Boyle Heights probably goes for 10x or maybe even less.

If you’re really serious about finding out exactly what your property is worth, whether out of curiosity or because you’re thinking of selling or re-financing, get in touch. If you give me the address and the rent roll for any building in Los Angeles and answer a few other questions, I can give you a rough sense for the value in five minutes or less. It’s like a party trick, but for really, really boring parties.


Written by mjkagan

01/21/2013 at 6:56 am

Posted in Brokerage, Selling, Success

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