Price per Unit
Price per Unit, in short
Price per unit is a multifamily property's purchase price divided by its number of apartments. A 24-unit building bought for $3,600,000 costs $150,000 per unit. It lets you compare buildings of different sizes at a glance, but it ignores rents, expenses and condition, so use it to screen deals and confirm value with NOI and cap rate.
Also called price per doorcost per unitprice per apartment
How price per unit works
Price per Unit = Purchase Price ÷ Number of Units
A "unit" is one separately rentable apartment, whatever its size. If a 24-unit building sells for $3,600,000, the price per unit is $3,600,000 ÷ 24 = $150,000. Brokers quote it in listings and offering memoranda, and investors use it as a first filter because it needs only two facts: the price and the door count.
Turn the formula around and it becomes a rough pricing tool: estimated value = comparable price per unit × number of units. If similar buildings nearby have recently sold for $140,000 to $160,000 per unit, a 24-unit building lands between $3,360,000 and $3,840,000. That range is a starting point for a conversation, not an appraisal.
The price per unit calculator does this arithmetic and also shows the building's gross rent multiplier when you enter rent.
Worked example: same price, different buildings
Two buildings are listed at the same price. Both have units renting for $1,300 a month.
| Building A | Building B | |
|---|---|---|
| Price | $3,600,000 | $3,600,000 |
| Units | 24 | 20 |
| Price per unit | $150,000 | $180,000 |
| Gross annual rent ($1,300 × 12 × units) | $374,400 | $312,000 |
| Gross rent multiplier | 9.62x | 11.54x |
The price tags match, but Building B costs $30,000 more per door and earns less rent in total, so the buyer pays 11.54 times gross rent instead of 9.62. Unless Building B has something Building A lacks (larger units, a better location, upside from renovations), it is the more expensive building. Price per unit exposed that in one division.
These figures are illustrations computed with the site's calculator, not market data. The $1,300 rent is an assumption chosen to keep the arithmetic easy to follow.
What price per unit hides
Now hold price per unit constant and change the income. Two 24-unit buildings both sell for $3,600,000, or $150,000 per door. Building C produces $216,000 of net operating income and Building D produces $270,000.
- Building C: $216,000 ÷ $3,600,000 = a 6.00% cap rate
- Building D: $270,000 ÷ $3,600,000 = a 7.50% cap rate
Identical price per unit, a one-and-a-half-point gap in yield. At the same 6.00% cap rate that Building C trades at, Building D's income would support a price of $4,500,000, or $187,500 per unit. Price per unit cannot see any of that. It does not know the rents, the vacancy, the expense load or the deferred maintenance. It treats a fully renovated unit and a unit that needs a new kitchen as the same door.
That is the reason professionals use it as a screen and then move on. The decisions that matter are made on the rent roll, the trailing 12 months of expenses and the resulting NOI.
Price per unit vs. other multifamily metrics
- Price per unit vs. price per square foot. Per-unit pricing ignores apartment size. A building of 450-square-foot studios and a building of 1,100-square-foot three-bedrooms can both trade at $150,000 a door, yet the second is far cheaper per square foot. Where unit mixes differ, compare both.
- Price per unit vs. gross rent multiplier. GRM divides price by gross rent, so it brings income into the comparison. It is still blind to expenses, but it catches the Building A versus Building B problem above.
- Price per unit vs. cap rate. Cap rate is the real valuation measure because it uses NOI. Price per unit is the speed measure. Use them together: per-unit pricing to pick which listings to study, cap rate to decide what the building is worth.
- Price per unit vs. price per bedroom. Some student-housing and co-living deals are quoted per bed, because rents are set per bedroom rather than per apartment.
Why lenders care
A lender does not size a loan from price per unit. Proceeds come from the tests that depend on income: debt service coverage, loan-to-value and, on some loans, debt yield. For a typical bank loan on multifamily, the loan-to-value figure is 65–75% (80% multifamily).
Per-unit numbers still show up in underwriting, in two ways.
- The appraiser's sales comparison approach. An appraisal on an apartment building usually weighs recent sales of similar buildings, adjusted for size, age and condition, alongside the income approach. Price per unit is one of the standard units of comparison. If your contract price is well above the comps per door, the appraised value, and therefore the loan, can come in short.
- Loan per unit as a sanity check. Divide the loan by the units. On Building A, a hypothetical $2,520,000 loan is $105,000 per unit, which is 70% of the $150,000 purchase price per door. A credit committee that sees a loan per door close to the full price per door of nearby sales will look hard at the underwriting.
Size matters at the threshold, too. Freddie Mac's multifamily business buys mortgages on buildings with five or more units, and lending at that size is a commercial product underwritten largely on the property's income. If you are comparing a 4-unit building with a 6-unit building, you are likely comparing two different kinds of financing. Our guide to financing a 5-unit apartment building covers that line.
What to watch for
- Count units the way the lender will. A listing may count a converted basement, an unpermitted apartment or a manager's unit. Lenders and appraisers count legally rentable units, and the rent roll should match.
- Compare like with like. Per-unit comps are only useful against buildings of similar age, class, location and unit mix. Mixing a 1970s walk-up with a 2020 elevator building produces a number that means nothing.
- Look at what the price per unit buys in rent. Divide in-place rent per unit by price per unit. If the building's rents are far below market, the low price per door may be a fair price for weak income, not a bargain.
- Add the renovation budget. For a value-add purchase, price per unit plus renovation cost per unit is the real all-in cost per door. Compare that with the price per unit of fully renovated comparables to see whether the plan leaves any room for profit.
- Do not negotiate on price per unit alone. A seller may defend a price by pointing at higher per-door sales elsewhere. Respond with the building's own NOI and the cap rate that price implies.
- Know which units are vacant. Price per unit counts every door equally. A building with 6 of 24 units vacant is not worth the same as a fully leased one at the same per-door price, and a lender will underwrite on actual occupancy.
Using price per unit before you apply
A sensible order for a multifamily purchase is to screen on price per unit and GRM, then request the rent roll and trailing 12 months, then run NOI and cap rate, and only then test financing. When you have those documents, send us the rent roll and T-12 and we will show you how a lender would size the loan. Our multifamily loan page explains the products available for apartment buildings, and the cap rate guide goes deeper on the valuation step.
Sources: Freddie Mac, Multifamily Securitization investor presentation (mf.freddiemac.com), on its multifamily business covering buildings with five or more units. Buildings A and B were computed with the site's price per unit calculator; the cap rate, implied-price and loan-per-unit figures are simple arithmetic. All examples are illustrative, not market data.
Frequently asked
What is price per unit in real estate?
Price per unit is the purchase price of a multifamily property divided by the number of rentable units, often called price per door. A 12-unit building that sells for $1,800,000 trades at $150,000 per unit. Investors use it to compare buildings of different sizes quickly, before they have operating statements.
What is a good price per unit for an apartment building?
There is no single good number, because price per unit moves with market, unit size, age, finish level and rents. The useful comparison is against recent sales of similar buildings in the same submarket. A price that looks cheap against those sales may simply reflect a building with lower rents or heavy deferred maintenance.
Is price per unit the same as price per square foot?
No. Price per unit divides by the number of apartments, while price per square foot divides by building area. A building of large three-bedroom units and a building of small studios can sell at the same price per unit but at very different prices per square foot. Appraisers and lenders usually look at both.
How do lenders use price per unit?
Lenders do not size a loan from it. They size from net operating income, debt service coverage and loan-to-value. They do use price per unit, and loan per unit, as a sanity check: a loan or price far above what comparable buildings fetch per door invites questions from the appraiser and the credit committee.
Should I use price per unit or cap rate to value an apartment building?
Use both, for different jobs. Price per unit tells you how the price compares with other buildings per door. Cap rate tells you what return the building's income produces at that price. Two buildings can cost the same per unit and have very different cap rates if one earns more rent per apartment or runs on lower expenses.