It’s of utmost importance when investing in apartment buildings to understand how to determine the current value of the asset and the principles of the valuation method.
So this short video, I walk you at a high level through the various valuation approaches used by appraisers and banks alike with emphasis on the ‘INCOME CAPITALIZATION APPROACH’ which used for multifamily properties.
YES, I’m going to talk about ‘CAP RATES’ and demystify them once for all! I’m also attaching an article I’ve written on this subject years ago which includes some tips.
First though, let me tell you the following:
DON’T GET HUNG UP ON CAP RATES!
That’s because you don’t get to choose the cap rate! Your banker and/or CMHC and the market decide what the cap is going to be.
If you really want to get hung up on something:
‘GET HUNG UP ON CASH FLOW!’
You must make the apartment building has a net positive cash flow.