Are you wondering how buyers and appraisers put a number on a duplex, triplex, or fourplex in Outer Richmond? You want a clear framework that fits San Francisco’s rules and the way small buildings actually operate. In this guide, you’ll learn how 2 to 4 unit properties are valued, which local factors move the needle, and how to prepare a rent roll that gives buyers confidence. Let’s dive in.
Valuation basics for 2 to 4 units
Income approach: cap rate and NOI
The income approach values a building based on how much income it produces. You start by calculating Net Operating Income (NOI).
- NOI = Effective Gross Income − Operating Expenses
- Cap rate = NOI / Sale Price
- Rearranged: Sale Price = NOI / Cap rate
Effective Gross Income is your scheduled rent minus vacancy and credit loss, plus other income such as parking or laundry. Operating expenses include items like insurance, utilities you pay, repairs, property taxes, and management. They exclude mortgage payments and income taxes.
Why it matters in Outer Richmond: cap rates reflect San Francisco realities like rent control, rent growth expectations, tenant stability, and location amenities near Golden Gate Park and the ocean. Investor buyers focus on verified income and realistic expenses, so clean numbers are essential.
Illustrative example:
- A 3 unit building collects $8,400 per month in scheduled rent. That is $100,800 per year.
- Assume 5 percent vacancy and collection loss. Effective Gross Income is $95,760.
- If operating expenses are 40 percent of effective income, expenses are $38,304. NOI is $57,456.
- If a buyer targets a 4.5 percent cap rate, an indicated value is $57,456 divided by 0.045, or about $1,277,911.
These figures are examples. Use current local cap rates and your real expenses.
GRM: a quick screen
Gross Rent Multiplier (GRM) is a simple ratio.
- GRM = Sale Price / Gross Annual Rent
It helps when expense data are incomplete or to compare similar 2 to 4 unit comps. It does not account for expenses or capital needs, so you should always pair GRM with an expense review. Using the same example, if a comparable closed at a GRM of 12, the implied price is 12 times $100,800, or $1,209,600.
Sales comparison: price per unit and per square foot
Small buildings often trade in a mixed buyer pool of owner-occupants and investors. That is why price per unit and price per square foot still matter. You compare recent Outer Richmond sales, then adjust for unit mix, size, parking, condition, rent levels, and regulation.
- Price per unit = Sale Price / Number of units
- Price per square foot helps when unit sizes vary
Cost approach: rarely decisive
The cost approach looks at building replacement cost minus depreciation. It is useful for newer or unique properties but is rarely the driver for older Outer Richmond stock.
Reconcile to a range
No single method is perfect. Smart buyers and sellers compare the income approach to sales comps and GRM, then reconcile to a supportable range. Owner-occupants may accept lower yields, while investors tend to be disciplined on cap rate and expenses.
Local factors that move value in Outer Richmond
Rent control and tenant protections
Most units built before mid-1979 are subject to the San Francisco Rent Ordinance with rent control and just-cause protections. State law also covers many units, and local rules can be more protective. The result is limited near-term rent growth for controlled units. Buyers analyze allowed increases, vacancy rules, and any potential relocation obligations. Cap rates tend to be higher when upside is constrained.
Parking and on-site amenities
Parking is a meaningful premium in San Francisco. Dedicated off-street parking can lift value compared to a similar building without it. Other income-producing or convenience amenities also matter, such as in-unit laundry, outdoor space, separate meters, or coin-op laundry.
Unit mix and legal status
Buildings with more 2 bedroom or larger homes usually command higher per-unit rents and broader buyer interest. Legal unit counts are under the microscope. Unpermitted conversions or in-law units add risk and can reduce appraised value until resolved.
Condition, capital items, and seismic work
Deferred maintenance lowers price because buyers will deduct expected repair and retrofit costs. Watch roofs, plumbing, electrical, exterior siding, and mechanical systems. San Francisco’s Mandatory Soft-Story Retrofit Program applies to certain wood-framed buildings. Compliance status influences lender comfort and timing.
Financing dynamics for 2 to 4 units
Financing can widen the buyer pool. Many programs treat 1 to 4 units as residential, which means an owner-occupant can use FHA, VA, or conforming conventional loans subject to limits and program rules. Investors often use portfolio or small-balance commercial loans with different rates and terms. Lenders focus on occupancy, debt service coverage, property condition, and local compliance.
Taxes and transfers
When a property changes hands in California, Proposition 13 triggers reassessment for property taxes. Investors also consider 1031 exchanges, depreciation, and potential capital gains. Always consult tax and legal professionals.
Build a sale-ready rent roll
A clean, verifiable rent roll can increase buyer confidence, speed due diligence, and support stronger pricing. Focus on clarity and documentation.
Essential fields to include
- Unit identifier and type with approximate square footage
- Current monthly rent actually paid
- Lease start and expiration dates, or month-to-month status
- Security deposit amount and date collected
- Utilities paid by tenant versus landlord
- Parking assignment and any separate parking rent
- Laundry, storage, and other income such as garage or pet fees
- Tenant names and contact for verification during due diligence
- Subsidies or vouchers and contract terms
- Rent control or exemption status
- Document status, including lease copies and proof of the last 12 months of payments
- Notes on concessions, arrears, or pending lease disputes
- Move-in date and history of rent increases
Backup documents that increase confidence
- Copies of current signed leases
- 12 to 24 months of rent payment history
- Operating statements for the past 12 to 36 months
- Recent utility invoices for owner-paid utilities
- Proof of registration with the San Francisco Rent Board when required
- Records of deposits and tenant funds held
- A unit-by-unit market rent estimate spreadsheet
How operations change pricing
Operational details influence underwriting and price. Here is how buyers view common items:
- Lease length and stability. Fixed-term leases can add certainty. A high share of month-to-month may raise perceived risk but could allow faster rent resets within local rules.
- Below-market rents. There may be long-term upside, but rent control and just-cause rules temper it. Do not assume rapid growth.
- Concessions and free rent. These reduce effective income. Always calculate Effective Gross Income rather than relying on scheduled rent.
- Subsidies. Voucher income can be stable but may grow more slowly than market rates.
- Informal tenancies or missing leases. These raise risk and usually reduce price until documented.
- Short-term rentals or unauthorized sublets. These can violate local laws and reduce value until resolved.
- Repairs and capital needs. Expect buyers to deduct near-term capital expenses from offers.
Pricing and adjustments using comps
Comparing to recent Outer Richmond sales helps anchor your range. Make smart adjustments so you are not comparing unlike properties.
- Unit count and mix. Adjust for the number of 2 bedroom versus 1 bedroom units when using price per unit.
- Parking. Add or subtract value for off-street parking.
- Legal status. Apply a discount for unpermitted units, or a premium for fully permitted conversions.
- Rent roll differences. Normalize NOI when a comp has higher or lower expenses, occupancy, or concessions.
- Condition and CapEx. Reduce values when significant immediate work is required.
- Regulation profile. Consider how many units are rent-controlled versus exempt across comps.
Due diligence checklist for smoother closings
Getting ahead of due diligence helps you avoid price erosion later in escrow.
- Verify permits and unit legality with local records
- Confirm soft-story and seismic compliance and gather retrofit documentation
- Order title, check for liens, and clear any issues
- Inspect roof, foundation, plumbing, electrical, HVAC, and water heating
- Compile 12 to 36 months of operating statements and utility invoices
- Organize rent roll, leases, deposits, payment history, and any eviction records
- Confirm local registrations and compliance certificates
- Review property and liability insurance history
Practical steps to maximize value before listing
- Standardize your rent roll and verify it against bank statements and ledgers
- Register units with the Rent Board if required and fix small code items when practical
- Separate recurring income from one-time credits or reimbursements
- Provide a tenant ledger that shows any delinquencies and resolutions
- Obtain basic condition assessments and bids for major repairs to reduce uncertainty
When an owner-occupant may pay more
In the 2 to 4 unit segment, an owner-occupant buyer who plans to live in one unit may accept a lower cap rate if the property fits lifestyle needs. They can sometimes access attractive loan programs, which helps them compete with investors. If your building includes a larger unit that works well for an owner, highlight that unit’s functionality, parking, natural light, and any in-unit amenities.
Work with a local advisor who also manages
Valuing a small multifamily in Outer Richmond is part math and part local operations. A clean rent roll, clear compliance status, and realistic expense profile all support stronger pricing. If you want hands-on guidance, partner with a local broker who can help you buy, manage, lease, and sell within one relationship, and who brings vendor networks, market data, and lender connections to the table.
If you are planning, valuing, or preparing to sell a 2 to 4 unit building in Outer Richmond, reach out to Kevin Wong for a tailored opinion of value, rent roll prep, and a step-by-step plan to navigate San Francisco’s rules. Let’s Connect with Kevin Wong.
FAQs
How are 2 to 4 unit buildings valued in Outer Richmond?
- Buyers use multiple methods, including the income approach with cap rate and NOI, GRM for quick comparison, and sales comps using price per unit and per square foot, then reconcile to a range.
What cap rate should I use for a small Outer Richmond building?
- Cap rates are market-derived and depend on risk, financing, rent control, condition, parking, and lease stability. Use recent local 2 to 4 unit comps rather than large multifamily metrics.
How does San Francisco rent control affect my value?
- Rent control and just-cause protections limit near-term rent growth and add holding risk, which can push cap rates higher. Buyers will underwrite allowable increases and vacancy rules.
What goes into a sale-ready rent roll for a 2 to 4 unit?
- Include unit type and size, current rent, lease terms, deposits, utilities splits, parking, other income, rent control status, and attach lease copies with 12 months of payment proof.
Do parking and amenities change pricing?
- Yes. Off-street parking, in-unit laundry, outdoor space, and separate meters can increase rents and buyer demand. Compare to comps with similar amenities.
Will seismic or soft-story work impact value?
- Compliance and documented retrofit work increase lender comfort and reduce buyer discounts. Outstanding seismic obligations typically reduce price by the estimated cost of completion.
