Posted 07-28-2008 1:10 pm by
How much is your Seattle apartment worth? As part of my Free Property Valuation for apartment owners, I conduct 3 tests to determine property value.
First, I look at price per net rentable square foot. Net rentable square footage is a very specific term, so let me clarify what I mean by it. Suppose you have a 7-unit apartment in Seattle. The tax record will give you 2 numbers: a lot square footage, and a building square footage. The lot square footage is the building square footage + any land. If the building is 10,000 square feet and the lot square footage is 12,000, you know that there are 2,000 square feet of land that the building does not occupy. If the lot is 12,000 square feet and the building square footage is 30,000, you are probably looking at a multi-story building. Back to our 7-unit apartment example, the building square footage considers all the square footage inside the building, while the net rentable square footage is what you can actually rent out to produce income (meaning you don't consider the hallways, staircases, and common areas).
Why is the net rentable square footage important? Because ultimately, people buy income properties for the income. Buyers want to know how much square footage your building has that can be rented out to produce income. That's why we consider the price per net rentable square foot for the area, and derive a property value for you based on sold comparables.
The second test we employ is the price per unit. Looking at the sold comparables, we determine how much buyers are paying per unit. This measure can sometimes be less accurate because it does not take into account how many bedrooms (a 7-unit apartment with all 2-bedroom units is worth a lot more than a 7-unit apartment with only studio units), and how nice and updated the interiors are.
The third test we use is the income approach, taking your building income, expenses, and the property cap rate to derive a property value. Depending on the condition of your building and the rent comparables, we may weigh the property value derived from one test more heavily than the one derived from another.
At the end, you will get 3 suggested prices from your Free Property Valuation: a "Quick Sale Price", a "Fair Price", and a "Maximum Price". The Quick Sale Price is to sell your property in 30 days or less. The Fair Price takes 2-6 months, and getting the Maximum Price could mean waiting for 6 months or more. Knowing the price range in which your property could sell for allows you to make a more informed decision of whether or not to sell your Seattle apartment.
---Written by Oliver Wu
Oliver Wu | Advantage Commercial Brokers
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