What Is My Apartment Building Worth in Today’s Market?

I get this call at least once a week. An owner has a great building, they’ve heard the market is hot, but they’re staring at a Zestimate that feels completely disconnected from reality. Here’s the truth: valuing an apartment building has almost nothing to do with the methods used for a single-family home.

It’s less about feelings and finishes, and more about the cold, hard numbers. Appraisers, brokers, and investors are all trying to answer one core question: how much money does this asset actually make?

The Bottom Line Up Front

If you’re in a hurry, here’s what you need to know:

• Profit is Everything. Your building’s value is chained to its Net Operating Income (NOI). If you increase your profit, you increase your building’s value. It’s that direct.
• The “Cap Rate” is the Magic Number. This single percentage is how the market prices risk and reward. A lower cap rate means buyers are willing to pay more for your income stream.
• “Comps” are a Reality Check. What have similar buildings nearby actually sold for? This price-per-unit check keeps everyone honest and ensures your valuation isn’t happening in a vacuum.
• Potential Still Counts. A run-down building is obviously worth less than a renovated one. But if there’s clear potential to raise rents or add value, that “upside” has a price tag, too.

The 3 Ways Your Building is Actually Valued

While every deal has its own story, any professional valuation is going to be a blend of these three methods.

1. The Income Approach (The One That Matters Most)

This is the main event. An apartment building is a business, and its value is based on the profit it generates. The whole process starts with calculating your Net Operating Income (NOI).

Think of it this way: Total Income (Rents, laundry, etc.) - Operating Expenses = Net Operating Income (NOI)

Your operating expenses are all the things you have to pay for to keep the place running: property taxes, insurance, maintenance, management, utilities—everything except your mortgage.

Once you have that NOI number, you can figure out the value using the market Capitalization (Cap) Rate. The formula is just Value = NOI / Cap Rate. Don’t get too hung up on the math; the real art is finding the right cap rate. It reflects the mood of the market in your specific area.

I’ve seen cap rates change by a full point just by crossing the street from one block to the next. A building in Chicago’s Lakeview might get a 5.5% cap rate, while a similar building a few miles away gets 7%. For a building with an NOI of $100,000, that’s the difference between a $1.8M valuation and a $1.4M one. That’s why you can’t trust a generic online calculator.

2. The Sales Comparison Approach (The “Comps”)

You know this one from the residential world. What have similar properties sold for recently? This is our sanity check.

We look at a few key metrics:

• Price Per Unit: A 10-unit building sold for $1.5M? That’s $150,000 per door. How does yours compare?
• Price Per Square Foot: This helps even things out when comparing buildings with different unit sizes.

Just last month, we analyzed a building in Pilsen. On paper, it looked just like one that sold down the street. But the “comp” had a brand-new roof and recent tuckpointing, while our client’s building needed about $80k in work. You have to account for those differences.

3. The Cost Approach (The Wild Card)

And then there’s the Cost Approach. To be blunt, this one is mostly for insurance adjusters and valuing brand-new construction. It asks what it would cost to build your exact property from the ground up today. A buyer is almost never going to pay you “new build” prices for a 50-year-old building, so we use this method sparingly.

So, What’s the Real-World Answer?

The true market value of your building isn’t just a formula. It’s a story told by the numbers. It’s a blend of these methods, heavily weighted toward the income your property produces. An experienced pro starts with the math and then adjusts for the narrative—the quality of your tenants, the potential to nudge rents higher, and the direction the neighborhood is heading.

Frequently Asked Questions (FAQ)

If you’re trying to figure out what your apartment building is worth, the math can get overwhelming fast. If you want a hand running the numbers, don’t hesitate to reach out. We’re happy to help.