Real Estate Talk:
Multi-res negotiation

The difference between the asking and selling price in multi-residential income property

By Joseph Marovitch

December 4, 2025

One of my disciplines in real estate is multi-residential income property for interested investors. In working with experienced investors with many doors (apartment buildings), I rarely receive the following comment unless the investors are developers who intend to renovate and/or upgrade a building.

Comment: “The price per door is too high.” This comment can be based on the fact that the property is overpriced, given the rate of return. It can also be stated as a reason not to pursue the property because the investor is actually in a lower price range.

Experienced investors are aware that the value of multi-residential income property is based on the cap rate, and the rents in the building are based on comparable rents in nearby similar properties.

However, experienced investors are aware that the value of multi-residential income property is based on the cap rate, and the rents in the building are based on comparable rents in nearby similar properties.

The Capitalization Rate formula is: Net income/value or asking price x 100 = Cap Rate

If a property is asking $1,000,000 and the net income is $50,000, the cap rate is 5 or a 5% rate of return.
$50,000 Net Income / $1,000,000 Asking price x 100 = 5 Cap rate or 5% rate of return

If this seller has 8 units, the price per door is $125,000.
If this seller has 16 units, the price per door is $250,000.

It is not the price per door that determines the value. It is the rate of return. Eight units at $125,000 per door or 16 units at $250,000 per door provide the same income or rate of return if the leases are verified to be accurate.

Multi-residential income property is a numbers game. Investors on one side of the world will purchase an income property on the other side of the world based on cap rates. A representative of the buyer in the country where the property is located will conduct a visit and inspection and verify the leases and expenses. Should the representative find discrepancies in the documents or issues in the inspection, the buyer will consider this an opportunity to renegotiate a lower price and a higher cap rate.

‘It is not the price per door that determines the value. It is the rate of return.’

In searching for an income property, there is intrinsic value based on cap rate formulas. Therefore, if a seller is asking a price that yields a 3.5 cap rate on a 20-unit income property, the buyer will either incur a loss or just cover expenses. Therefore, it is time to enter negotiations to price the property at a fair value that allows the buyer to generate income.

At times, a seller will price an income property based on its future potential value. However, cap rates are based on current value. If the seller wants to price the property based on potential unrealized income, the seller must or should perform the upgrades and fully rent the units prior to selling.

If the buyer must perform the upgrades and then rent the units, the buyer will expect a discount for all the work they must perform. To price a multi-residential income property based on future potential is like pricing a single home based on its potential increased value if a pool was built later. A seller must sell a property based on its current market value or cap rate, not on what it could be, which does not guarantee increased revenue.

Also, proper, accurate, and verifiable pricing will create greater interest, multiple offers, and the highest selling price more quickly than a property sitting on the market too long and losing value as each day passes.

‘To price a multi-residential income property based on future potential is like pricing a single home based on its potential increased value if a pool was built later.’

If a buyer finds a property that has been sitting on the market for six to 24 months, either the first thought is that something is very wrong with the property, or the seller must be more motivated after such an extended period. Therefore, a lower offer is presented.

To summarize, opportunities for sellers are found in proper and accurate pricing:

• More interest
• More visits
• Multiple offers
• Higher seller price
• Quicker transaction

Opportunities for buyers are found in improper and inaccurate pricing and the condition of the building:

• Inaccurate leases provide an opportunity to renegotiate to obtain a lower price and an acceptable cap rate
• Inaccurate expense, which indicates a lower cap rate than advertised, provides an opportunity to renegotiate to obtain a lower price and an acceptable cap rate
• Inspection with issues provides an opportunity to renegotiate to obtain a lower price and an acceptable cap rate

Therefore, if the asking price is too high, this should not stop a buyer from finding an advantage. The protocol for experienced investors is:

• Offer the price required to obtain access to the property, leases and expenses
• Verify the leases and have an inspection
• If the asking price is too high based on a lower cap rate than indicated, either:
 A) Renegotiate, B) Cancel the offer, C) Accept as is if there is very high potential to increase the revenue

If the asking price and cap rate are accurate and fair, then the decision is to either purchase the property or cancel based on the buyer’s budget.

The information in these articles is a summary. Should you have questions, comments or wish to discuss further, please refer to the comments section at the bottom of the page or contact me directly. As well, to view past articles, click here.

State of the market

A recent Montreal real estate report published by the Quebec Professional Association of Real Estate Brokers (QPAREB) in November indicates the following:

• A total of 3,543 residential transactions took place in November 2025, an 8% decrease from November 2024
• Five of the six main geographic areas declined in sales by 3%, including Montreal and the South Shore.
• Only plexes have increased in sales by 12%
• Single-family homes declined by 13%
• Condo sales decreased by 8%
• Active listings increased by 7% compared to November 2024
• Supply has increased more on the island of Montreal and the South Shore
• The market appears to remain in favour of sellers, though
• Prices in Montreal have exceeded the financial capacity of most buyers

All this data indicates that, with increasing supply and low demand due to unaffordability, prices will decrease, eventually putting buyers in a better position to finance a property and cover carrying costs. The real estate market indicators show a market becoming more balanced. This means 2026 should be a noticeably improved year.

‘The real estate market indicators show a market becoming more balanced. This means 2026 should be a noticeably improved year.’

Eventually, sellers, with proper pricing and tactical marketing, will not have their property on the market as long and will gain more interest, multiple visits, and offers. Sellers will have more inventory to choose from and be able to negotiate fair-market-value prices and better terms.

In the meantime, we are entering the holiday period. Enjoy the holidays and read my last article, Real Estate Talk: Holidays pros and cons.

For further discussion, leave a comment or call me directly.

Have a great week and happy holidays

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