Two numbers, and they argue with each other
A two-to-four family gets looked at twice. Once as a building, against what comparable buildings sold for. Once as an investment, against what it collects.
Those two figures rarely land in the same place first time, and the distance between them is the whole substance of the assignment.
Picture a three-family in Bayonne with tenants ten years in place at ten-year rents. Its income value can sit well below what the sales comparison says, because the sales were made by buyers underwriting a re-tenanted building rather than the one that exists today. Anyone paying the sales figure in cash is buying income the property does not currently produce.
So both approaches get developed, and then the report says plainly which one the market in that municipality is actually pricing on. Reconciling with a line about giving weight to both is where these reports quietly fail.
The unit count has to be legal
This is the single commonest reason an owner’s expectation and a supportable value part company on small New Jersey multi-family.
Much of this housing predates the zoning that now governs the block. Basements and attics get finished. A legal two-family running as a three-family is not remotely unusual around here.
Where a unit is unpermitted or absent from the certificate of occupancy, it generally earns no income credit. That rent is not legally reliable: a buyer cannot depend on collecting it and a lender will not underwrite against it.
The space can still contribute as living area. It does not contribute as a unit.
Learning this from an appraisal is a great deal more comfortable than learning it from a buyer’s lender a fortnight before closing.
Many municipalities also require a continued certificate of occupancy on sale or on a change of tenancy. Where one exists it is real evidence of what is lawfully there, and it is worth having to hand.
Rent control, where it bites
New Jersey has no statewide rent control. It has a substantial patchwork of municipal ordinances, and they differ from one town to the next — different caps, different exemptions, different treatment of vacancy decontrol.
Where an ordinance applies, contract rent can sit a long way under market, and that gap does not simply get added back to reach a number.
What matters is what a buyer can actually do with the rent roll. The analysis has to price the constraint rather than an unrestricted market rent that nobody is permitted to charge.
Access is the scheduling problem
Tenanted units are why turnaround on these runs longer than on a house.
Give whatever notice the leases require, and tell us early which doors are likely to be difficult. Where a unit genuinely cannot be inspected, the report proceeds on a stated extraordinary assumption — legitimate, and weaker. If the figure has to survive examination, it is worth the delay to get inside first.
Why the fee is quoted individually
On an ordinary single-family house the work does not really scale with the building. Here it does.
Several units mean several inspections arranged around other people’s lives. An income approach has to be built and supported rather than asserted. The comparable sales are thinner, and the ones that exist need more explaining.
You get the figure in writing before any of it starts.
New Jersey specifics
- Most of this stock sits in Hudson, Essex, Union and Passaic, and a great deal of it predates the zoning now governing the block. Legally non-conforming use is common and has to be identified, because it bears on what a buyer could rebuild after a loss.
- A large number of New Jersey municipalities require a continued certificate of occupancy on sale or on a change of tenancy. An unregistered unit is a valuation problem rather than a paperwork one — an informal fourth unit in a legal three-family earns no income credit.
- Rent control exists in a substantial number of New Jersey municipalities and nowhere statewide, so the ordinance differs town by town. Where one applies, contract rent can sit well under market and the gap is not simply added back.
What you receive
- A report carrying both a sales comparison and an income approach, with a reconciliation saying which carried the conclusion and why
- Actual rents tested against market rents for that municipality
- A unit-by-unit description where access allowed, and disclosure where it did not
- Signed USPAP certification
What we need from you
- A rent roll, and the leases if they exist
- Recent operating costs — taxes, insurance, owner-paid utilities, maintenance
- Which units are owner-occupied and which are tenanted
- Early warning about any unit you cannot get into
- The certificate of occupancy, or continued-occupancy paperwork where the town issues one