When purchasing a multi-family property (duplex, triplex, fourplex, apartments) it is important to pay attention to the rents that are being collected or GSI (gross scheduled income) vs what the market rents are in that particular area. Many long term owners keep their rents low to keep their tenants happy in hopes to get less repair calls. This practice can result in an increase in GSI for you when you buy that property. You can in theory buy the property at possibly below market value. based on the current GSI. and raise the rents which would result in an immediate win for you.
Each area has a Gross Rent Multiplier (GRM) which is often used to determine an asking price. The GRM in Orange, CA is between 13 and 15 depending on the area or condition. You take the GSI and multiply it times the GRM in that area and this should give you an asking price. Some agents use Pro Forma GSI for their calculations. Pro Forma is the current market rents in the area instead of the actual rents. This can make the difference on whether you get a good deal or not. It is better to get low rents and a low price instead of high rents and a high price. Of course operating expenses can change everything, and that is another story.
If you are interested in purchasing a multi-family (duplex, triplex, fourplex, apartments) property in Orange County, CA be sure to contact us at (714) 922-0310.