Being as PadMint instant apartment valuations will be the first of its kind that can easily be accessed by anyone we figured it would worth touching on a little so people understand it better. AVM's or Automated Valuation Models have been around for quite some time in the residential sector (Zestimate) and it seemed to generate quite a bit of buzz when it first came to market. Multiple residential sites now provide valuations for homes and people can go to multiple sites to see the different values. Being as commercial properties are mostly valued on their incomes there are a few other steps involved in generating a valuation for a commercial building.
The best place to start when talking about these valuations is the point that this is NOT the end all be all number for a particular building. Although these valuations are usually pretty close to what a building sells for it's important to understand that this is just a close range or starting point to understanding what your building is worth. Similar to when you look up a car on Kelley Blue Book to get a valuation. This isn't necessarily what the car will sell for exactly but is a starting point/range for you access as the owner. These valuation models take a close look at a lot of surrounding market data but every building is going to have different features that affect the building's value. Is the building brand new? How well are the units taken care of? Does the roof need to be fixed right away? What is the plumbing like? Is it rent controlled or non-rent control? Are there any vacancies? The list goes on. On top of these other factors, a building is only truly worth what someone is willing to pay for it! The market data could point to your building being worth $1,000,000 dollars but the highest bidder may only be willing to pay $900,000. These valuations aren't meant to upset anyone or make them think "No way! My building is worth so much more!" it's simply a starting point for you to understand what is going on in the market around you.
Unlike residential, which can have emotional purchases that can make prices fluctuate, apartment sales are typically investments that are driven by the incomes the building generates (and the "upside" potential). Being as this is the case, you aren't going to see massive fluctuations between two similar 5 unit buildings in Hollywood for example. Just to clarify, there may be a difference in the price but most of the time the income generated will paint a similar picture for what the building eventually sells for. What we mean by this is a 5 unit building might sell for $1M dollars in a given neighborhood and another 5 unit building might sell for 1.5M. However, the building that sold for 1M most likely is generating a lower yearly income than the building that sold for 1.5M. Note that the 1M building most likely has more "upside" aka future potential meaning the potential buyer is looking at this building based on the income it could be generating.. not the income it's generating today. We call this a value-add asset. The 1.5M building may not have much upside potential at all because it has achieved maximum rents for all of its units. This is what we would call a stabilized asset. This is also important to note because a lot of owners see a similar building to theirs and go "Oh mine is worth 1.5 million too I guess". It's possible but it needs to be generating the same type of income and be in the same condition. The income is very important for these investment assets!
The PadMint valuations look at the local market data, market rents in a given area, and the incomes generated by a particular property to provide an accurate valuation for an apartment building. The valuation will continue to refine itself as time goes on and it will also change as the market changes! Now you can see what is going on in the market around you with ease and hopefully use this as a tool before making any big decisions. The goal is to make better relationships and bring more transparency to agents and their clients. Now there is a place for everyone to easily access information and discuss with one another about what price they should actually take the building to the market for without making big mistakes and losing potential buyers. All parties involved will be able to see the same information removing any uncertainties one might have!