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Floor Multiplier: Valuing Low Floor Vs High Floor
By: Noah Rosenblatt   Thursday, November 10, 2011 12:08 AM
Symbols: APT
AMOUNT OF GAP IN FLOORS: We have to be cognizant in the gap in floors between the target apartment and the comp. For larger gaps, we need to lower the floor multiplier or risk over-estimating the premium that a higher floor unit can absorb on the open market. a) Small Gap in Floors -->: Lets call it the difference between Unit 3A and Unit 6A. In this scenarios we should maintain the floor multiplier or in some cases, raise it a bit if there is a drastic change in view. Think about it, if there is a 4 story building opposing these two units that limits Unit 3A but does not affect Unit 6A, we should properly add that in even though there is only a 3 floor difference. b) Big Gap in Floors -->: Lets call it the difference between Unit 3A and Unit 25A, a 22 floor difference. Now if we stick to the $20,000 or so a floor premium in this scenario, then the 25th floor would be valued about $440,000 more - clearly that is unrealistic and something that cannot be absorbed in the open market. So, if there is a big gap we should lower the per floor premium a bit so as not to over-estimate the premium that is likely in the open market. Hopefully your still with me and keep in mind that this is how I view comps analysis for my buyer clients - over time you start to get a natural feel for it. If I were to plot all these out into a table, it would look something like this: DRASTIC CHANGE IN VIEW/SUNLIGHTBIG GAP: Use $7,500 to $12,500 multiplier per floor SMALL GAP: Use $20,000 to $25,000 multiplier per floor NO/MINOR CHANGE IN VIEW/SUNLIGHTBIG GAP: Use $5,000 to $7,500 multiplier per floor SMALL GAP: Use $10,000 to $15,000 multiplier per floor An example from above would value Unit 25A about $30,000 more than Unit 22A where there is virtually no change in view. Also, we would value Unit 25A about $165,000 more than unit 3A where there is a drastic difference in view and amount of natural sunlight. I find that the most coveted properties (think Madison/5th Avenue types) will value higher floor units at a even higher multiplier than what I show here. For example, in a coop on 78th and Madison where a high floor unit gets a park view but a lower floor unit doesn't, I would go as far as using a $30,000 to $45,000 per floor multiplier to properly value the unit with park views. Again the market is a living thing and doesn't exist in a vacuum. In the end any unit is only worth what someone is both willing and able to pay for it. That leaves us brokers, buyers and sellers constantly wondering where that ultimate bid will eventually come in to value the property. In the meantime, this is the next best guess that I feel confident enough in to publish here on UrbanDigs!



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