THE REAL ESTATE INVESTOR'S BEST FRIEND !!
It didn't take me long to realize the ineffectiveness of the conventional Cost per Door calculation in multi-family real estate evaluation and comparison. Think about it for a moment, one unit can be a bachelor suite while the next one has 4 bedrooms and a dining room. Then, extend these inaccuracies to an entire multipe suite apartment building and you begin to realize the problem.
The cost per square foot calculation gives you absolutely no idea of the number of rooms involved, so to be effective, the comparison must be of buildings of approximately the same size.
Determined to find a more accurate metric, my research led me directly to Google of course. After several hours of searching, I discovered a mertric called "The Cost per Rentable Room" developed in New York City during the early 1900's, when New York was the North American centre of rental apartment buildings. When finalized, one starts with the assumption that a standard bachelor apartment has 2.5 rentable rooms and, for every room above a standard bachelor, you simply add another room, except for a 2 piece bathroom for which a half room is added. Therefore, a one bedroom apartment is 3.5 rooms and a two bedroom and a den is 5.5 rooms. Some times, the use of discretion is required, but that is not called for very often. When the rooms numbers are calculated, the sum of rooms is divided into the asking or valuation price and you have the cost per rentable room, which I have used in every valuation and comparison since then. And, this metric has severed me very well over the years.
R. Mike Mullin, PREC
Licensed Commercial Real Estate Specialitist, throughout Vancouver Island and B.C., covering Investment and Residential Rental Properties,
VANCOUVER, VICTORIA, NANAIMO, COMOX VALLEY, COURTENAY. COMOX, PORT ALBERNI, CAMPBELL RIVER, PORT MCNEILL, PORT HARDY
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