Our recipe: Valuing an apartment building

This article was written and published in the 2016 Year-End Goodman Report.

What goes into the mix when we decide what a building is worth? Here’s our stew:

Location: It’s not just about municipality. Neighbourhood, street, corner or midblock position – they all matter too. We get into the nitty-gritty, converting the property’s location into a quantified value.

Improvements/Condition: Any deferred maintenance? If the large items have been completed (think roof, piping, elevator, any structural requirements), then investors will view the property with greater pricing consideration. Is it a legal non-conforming structure, or does it conform? Any unauthorized suites?

Suite mix: Price per suite will vary depending on mix of units (number of one-bedrooms, two-bedrooms, etc.). Type matters also: apartment or townhouse? Strata or rental? So does size, with some one-bedrooms averaging 500 SF, others 750 SF in older buildings. Sellers need to consider all of these factors when looking at price per suite or room weight.

Lot size: Does it conform to current regulations? How big is the lot on its own? Would the property need to be assembled in the event of redevelopment?

Zoning/OCP: What’s the existing zoning? What’s the official community plan (OCP) designation? Are these set to change in the short to medium term? What’s the underlying land value versus the income value?

Current rents versus market: How do current rents in the building compare with those prevailing in the market? Are newly leased units competing appropriately in terms of price and offerings as compared to others in similar buildings in the vicinity?

Other income: Parking, laundry, storage and antenna revenue all play a part in the calculation of the net operating income on a stabilized basis and can increase the value of your property.

Expenses: Comparing the previous year’s expenses against the current expenses is important. Line items such as property taxes, insurance, repairs and maintenance, utilities, caretaker fees and property management, as well as any non-recurring expenses, need to be reviewed and potentially normalized to arrive at a current picture today.

Sales and available listings: Compare apartment building and/or land sales and listings in the immediate area, adjusting for the property’s condition, location and make-up as well as for time and other factors as compared to the noted transactions.

Interest rates and investment climate: Interest rates (up, down or stable) play a significant part in determining what yield an investor will accept. Other than rates, how available is debt? What’s the investment climate like otherwise? Investors are always comparing their return on capital with other opportunities, even outside of real estate.

Environmental: An up-to-date Stage 1 environmental report is extremely important.

Opportunity: Any future opportunity to add a suite? To expand or subdivide the site? To redevelop?



Cynthia Jagger, B.A. DULE, AACI, P. App (Retired)

As a powerhouse broker and key member of the Goodman Team, Cynthia provides clients with the most valuable thing in the marketplace: knowledge.

For our clients, she answers questions like “If I buy this piece of land, what use would create the highest profit? If I buy this apartment building today, what rent could I charge now and after renovations?” and “If I buy a piece of land and build on it, what would the cost of development be? What will it be worth when it’s finished?”

Cynthia knows multi-family investments and land. As a past appraiser, she’s consulted and analyzed tens of billion of dollars worth of commercial real estate in B.C. and hundreds of rental apartment buildings. She’s underwritten and provided guidance on some of the biggest land deals in Vancouver’s history.