With the passage of Oregon Rent Control SB 608 many multifamily property investors are wondering about the potential value implications of the new law. Zoe York, MAI Appraiser with Duncan & Brown, discusses the impact of market trends and rent control on two-to four-unit multifamily properties in Eugene, Lane County, Oregon.
[embedyt]https://youtu.be/2qvD3Rg6lvA[/embedyt]
Watch or Read
Since cap rates are applied to more complex properties, we won’t discuss it relative to two-to-four-unit buildings. And the reason that this calculation is so simple is that for two to four units, your expenses are not significantly varied. You don’t have pools necessarily. You don’t have elevators. You don’t have a lot of common area. This makes it very easy to apply a standardized income factor to two to four units without much worry about expenses. When we value two-to-four-unit properties, we use a gross rent multiplier. Or brokers dealing with a multiple listing service and a lot of investors will use a gross income multiplier. Those are the same interchangeable terms in terms of the methodology. But a gross rent multiplier (GRM) is a monthly factor and a gross income multiplier (GIM) is an annual factor.
Calculating Value with GRM and GIM
This calculation is relatively simple. If you’re using GRM, which is the monthly factor, you take the gross monthly rent times the GRM and get the value. It’s as simple as that. With the GIM, you take the gross annual rent times the GIM and get the value.
It can be a little more confusing to talk about both of these at these at once. But the reason I like to do this is in the appraisal world we use GRM, and I think that it is important to know the difference. But when I talk to investors and brokers, or when I am just talking to folks about income multipliers, they’re usually talking in terms of GIM. They say, ‘Oh well that was a 10 multiplier,’ and I’ll be scratching my head. I’m like, ‘Oh, you’re talking about GIM.’ So that is important to understand the difference between the two, but they are the exact same calculation.” —Zoe York
It’s your gross income, whether it’s monthly or annually times the factor. The figure gives you a hypothetical example of a duplex with $800 per unit in rent times two, displaying how the monthly and annual factor are calculated with those figures. The reason this is so important, as you can imagine is that when (or if) this factor changes, then you might have some value implications.
If you need assistance with appraisal services, visit www.duncanbrown.com.
If you want more information about Oregon Rent Control SB 608, visit Pacwest Commercial Real Estate’s Oregon Rent Control Central.
Disclaimer
Due to the complex nature of these changes, Landlords should contact an attorney with any questions or clarification of Oregon Rent Control SB 608.
Recent Comments