In this article, we will cover some of the most complex aspects of the INCP (Residential Income) Property Type.
We'll cover the impact that Duplexes, Triplexes, and Quadruplexes have on some of the key Unit fields. We'll then cover how these key Unit fields differ on the 5 or More Units property subtype. Then we'll cover how your listing's fields will appear on 3rd party sites such as Zillow. Lastly, we'll discuss how GRM, CAP Rate, and Tax Annual Amount are automatically filled out based on integrated MLS formulas.
Unit 1, 2, 3, & 4
For Duplexes, Triplexes, Quadruplexes, and "Other" property subtypes, Unit information is geared towards describing each individual unit in the property. Fields are required for Units 1 and 2 as a function of the distinction between the INCP and RESI property types, and then become optional in Units 3 and 4.
In the case of a Duplex, which has 2 units, you will put the information for one of the units in the "Unit 1" fields, and the information for the other unit in the "Unit 2" fields. If you have a Triplex or a Quadruplex, you'll fill the 3rd (and 4th) units in the "Unit 3" and "Unit 4" fields, respectively.
Multi-Unit Property Subtypes
For Multi-Unit buildings greater than 4 units, you will select the "5 or More Units" property subtype and then approach the "Unit" fields completely differently than you would treat them with a Duplex, Triplex, Quadruplex, or "Other" property subtype.
For "5 or More Units" buildings, you no longer will input individual units into the "Unit" information. Instead, you will input "bundles" of units into the "Unit" information. Say you are selling a 6 unit building. You may wish to input all of the 1-bedroom units in the "Unit 1" fields, all of the 2-bedroom units in the "Unit 2" fields, and all of the 3-bedroom units in the "Unit 3" fields.
Alternatively, you may wish to divide the units by occupancy type, inputting all vacant units into "Unit 1", all tenant-occupied units into "Unit 2", and all owner-occupied units into "Unit 3". You may divide the units by lease type, or by unit type if it's a mixed-use building. The possibilities are broad, and you as the listing agent have flexibility in navigating listing entry for these unit fields.
Downstream 3rd Party Vendors
Downstream 3rd Party Vendors must make interpretations to the listing data in order to present data in accordance with their own presentation choices.
In the case of Zillow, total bedroom and bathroom counts are determined using calculations on Zillow's end from combinations of listing data within the MLS. Briefly, these are:
Zillow's Bedrooms: # of 1 Bedroom Units + # of 2 Bedroom Units + # of 3 Bedroom Units + # of 4 Bedroom Units
Zillow's Bathrooms: Unit 1 Full Baths + Unit 1 Partial Baths + Unit 2 Full Baths + Unit 2 Partial Baths + Unit 3 Full Baths + Unit 3 Partial Baths + Unit 4 Full Baths + Unit 4 Partial Baths
Zillow's SqFt: the listing's SqFt field.
In the above figures, the property shows a bedroom count of "6" on Zillow, because the property has 1 1 bedroom unit, 1 2 bedroom unit, and 1 3 bedroom unit. (1 + 2 + 3 = 6).
The property has 7 baths on Zillow, because across all Unit 1-4 Full Baths and Partial Baths, there are 7 values. Zillow treats both Full Baths and Partial Baths as having a value of "1".
The last point of consideration is the financial autofill that has been instituted with the launch of the Super Regional MLS.
When you first enter your INCP listing into the MLS, you'll notice that Gross Rent Multiplier, Operating Expense, Net Operating Income, and CAP Rate are greyed out and unfillable. This is because these fields will automatically be calculated using formulas integrated into the MLS listing input engine. Additionally, the fields will be automatically updated when a listing is Sold, using the listing's sale price as a factor of the calculation.
If you do not wish to utilize these fields, leaving the Gross Scheduled Income at $0 will set the GRM, CAP Rate, and Net Operating Income blank.
The formulas for the fields are as follows:
GRM: List/Sale Price / Gross Scheduled Income
Operating Expense: all expense fields + the tax annual amount, calculated using SF's tax rate
Net Operating Income: Gross Scheduled Income - Operating Expense
Cap Rate: Net Operating Income / List/Sale Price
The "Tax Annual Amount" is an automatically calculated field that takes the list/sale price of the property and multiplies it by SF's property tax rate, which is updated annually. At the time of writing this in April 2022, that tax value is 1.1825%.
Here's an example:
If your listing's list price is $1,000,000, and your listing's gross scheduled income is $100,000, your GRM will be 10.
If you input $10,000 across all expense fields, your operating expense will be $10,000 + $11,825 (the tax annual amount) = $21,825.
Your net operating income will then be $100,000 - $21,825 = $78,175.
Your cap rate will be $78,175 / $1,000,000 = 7.82%.
Here's another example:
Your listing's list price is $1,000,000, and your listing's gross scheduled income is $0. You input $0 across all expenses.
Your GRM will be blank.
Your operating expense will be $0 + $11,825 (the tax annual amount) = $11,825.
Your net operating income will be blank.
Your cap rate will be blank.
If ever you update your gross scheduled income from $0 to a positive value, your calculations will be run and GRM, NOI, and CAP Rate will be present on your listing. Additionally, if ever you close the listing, the calculations will be run on the Sale Price, and not the List Price.