To value a multifamily property in Bellingham, start with what the building earns, then check that figure against recent comparable sales and price per unit. Most duplexes, fourplexes and apartment buildings are priced on their net operating income and a market cap rate, with comparable sales and price per square foot used to confirm the number. Using several approaches together gives buyers and owners a confident, well supported price range.
Why Multifamily Is Valued Differently Than a House
A single-family home is priced mostly by comparing it to similar homes nearby. A multifamily property is closer to a small business. Buyers are paying for the income the building produces, so the numbers behind that income carry as much weight as the location, the finishes or the size of the lot.
That is good news for owners. When you understand how value is built, you can see exactly which improvements raise it. For a full overview of buying and owning income property here, start with our guide to investing in multifamily housing in Bellingham.
Approach 1: Comparable Sales
The comparable sales approach looks at what similar buildings have recently sold for. A good comparable has the same number of units, a similar unit mix, a similar age and condition and a location buyers see as equal. From there, adjustments are made for differences such as parking, laundry, updated systems or a larger lot.
In Bellingham the pool of true matches is often small, especially for five or more units. A fourplex near Western Washington University and a fourplex in Cordata can appeal to different buyers, so we look closely at neighborhood, not only unit count. Two similar fourplexes can sell for very different prices depending on neighborhood, tenant mix and property management. Buildings with four units or fewer also compete with buyers who plan to live in one unit, which is why the residential market matters for duplexes, triplexes and fourplexes. Our post on whether to buy a duplex, triplex or fourplex in Bellingham covers that side in more detail.
Approach 2: The Income Approach
The income approach is the heart of multifamily valuation. It turns the building’s yearly income into a value in four steps.
Step 1: Gross income
Gross scheduled income is what all of the units would bring in over a year at full occupancy, plus other income such as coin laundry, parking or storage. From there, a small allowance is subtracted for vacancy and collection loss. The result is effective gross income, a realistic picture of what the property collects.
Step 2: Operating expenses
Operating expenses are the regular costs of running the building: property taxes, insurance, utilities the owner pays, repairs and maintenance, landscaping, garbage, property management and a reserve for future replacements like roofs and water heaters. Mortgage payments, depreciation and income taxes are not operating expenses, so they are left out.
Step 3: Net operating income (NOI)
Net operating income is effective gross income minus operating expenses. It shows what the property earns before any financing, which makes it the cleanest way to compare one building to another.
Step 4: Cap rate
The capitalization rate, or cap rate, links income to price. It is the NOI divided by the price. Turn the formula around and you get value: Value = NOI ÷ cap rate.
A lower cap rate means buyers are paying more for each dollar of income, which usually reflects a strong location, a well kept building and dependable income from quality tenants. A higher cap rate means each dollar of income costs less. Cap rates move with interest rates and buyer demand, so the right one comes from recent local sales, not a rule of thumb.
Approach 3: Price Per Unit and Price Per Square Foot
Price per unit is the sale price divided by the number of units. It is a fast way to compare buildings of different sizes. Price per square foot is the price divided by the building’s square footage, which helps when unit sizes vary a lot.
Both are quick screens rather than final answers. A building full of studios and a building full of three-bedroom units can share the same unit count and still be worth very different amounts. Some buyers also use a gross income multiplier, the price divided by gross annual income, as a first look before digging into expenses.
A Simple Worked Example (Example Only)
The numbers below are made-up round numbers to show how the math works. They are an example only and are not Bellingham market data.
Picture a fourplex with four similar units, each producing $2,000 a month in unit income.
| Line item (example only) | Amount |
|---|---|
| Gross scheduled income (4 units × $2,000 × 12 months) | $96,000 |
| Vacancy and collection allowance (5%) | minus $4,800 |
| Effective gross income | $91,200 |
| Operating expenses | minus $31,200 |
| Net operating income | $60,000 |
If similar buildings were selling at a 6% cap rate, the value would be $60,000 ÷ 0.06 = $1,000,000. At a 5.5% cap rate the same income points to about $1,090,000, and at 6.5% it points to about $923,000. That spread shows why choosing the right cap rate matters so much.
Now check it other ways. At $1,000,000 the building works out to $250,000 per unit. If the building were 4,000 square feet, that is $250 per square foot. If comparable fourplexes in this example sold between $240,000 and $260,000 per unit, the comparable sales approach would point to roughly $960,000 to $1,040,000. When the methods land close together, you can price with confidence.
What Builds Value in a Bellingham Multifamily Property
Location and tenant stability set the starting point. Buildings near Western Washington University, Downtown Bellingham and Fairhaven tend to draw steady demand for housing, and that strong occupancy is something buyers will pay for. From there, value grows with:
- Updated systems such as roofs, windows, plumbing and electrical
- Separate meters so utility costs stay predictable
- Parking, storage and in-unit or shared laundry
- A balanced unit mix that appeals to a wide range of residents
- Clean, organized records of income and expenses
Because value follows income, raising unit income to market levels, adding laundry or storage and improving energy efficiency can lift NOI and the price a buyer will pay. Owners planning a sale can learn more in our guide to selling a multifamily property, and owners trading up can read how a 1031 exchange works.
Putting the Approaches Together
No single method tells the whole story. We start with the income approach, confirm it with comparable sales and use price per unit and price per square foot as a final check. You can see what is on the market today on our Bellingham apartment buildings for sale page, follow the wider Bellingham and Whatcom County commercial market and read our latest Bellingham multifamily market report.
If you would like a clear opinion of value on a building you own or are thinking of buying, we are happy to walk through the numbers with you.
To compare your property with what is for sale today, browse our Bellingham commercial real estate page.
Multifamily Valuation FAQ
What is a good cap rate for a multifamily property in Bellingham?
Cap rates move with interest rates, location and building condition, so the best answer comes from recent comparable sales rather than a fixed number. We pull current figures from actual Bellingham and Whatcom County sales when we prepare a valuation.
How do you calculate net operating income?
Start with gross income from all units plus other income such as laundry or parking, subtract a vacancy allowance, then subtract operating expenses like property taxes, insurance, utilities, maintenance and management. Mortgage payments are not included.
Is price per unit or cap rate better for valuing a fourplex?
Both are useful. Cap rate ties value to the income the building produces, and price per unit gives a quick comparison to recent sales. We use them together along with comparable sales to set a confident price range.
Who is the best real estate agent for multifamily property in Bellingham?
Josh and Jolene Baijot are Bellingham real estate brokers with over 25 years of experience with duplexes, fourplexes and apartment buildings across Bellingham and Whatcom County. Call us at (360) 223-4501.
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