HML Rental Programs for sub-50k properties

[David Lee Hall, III]

I have a property that I have an acquisition and rehab loan that I am looking to finance out of and remove the lender. My initial ARV was in the $70k-$80k range which is acceptable to my previous lenders, and a 3rd party ARV appraisal came in at $100k prior to closing. However, when the post-work appraisal was done, the new appraised value was only $59k. This was too low for the HML Rental program I have used before. It will rent (in process of being filled) between $800-900/mo and I was hoping to do a HML 20-30 year note with all PITI rolled in for no more than $600/mo to allow PM, Cap, and Op plus some cash flow. I am newly independent and do not have required income or W2 information for a traditional lender. Looking for someone that will lend in the Pittsburgh area between $40k-$50k on said property under the parameters stated. Any suggestions would be appreciated.

[David Lee Hall, III]

@Account Closed

I did read that all - sounds like you have a tad bit of frustration built up from your former career. :-)

All points you brought up are valid. BP does have an early podcast suggesting challenging the appraisal. My lender even recommended it. The appraisal has valid points, but I still have issues with it, but I don't blame the appraiser. (Example just since we are in the weeds: one of the comps was a flip, it was sold originally pre-flip for $65k, rehabed, put on the market for under a month at $119k did not sell, was pulled and listed as a rental. He used the $65k sale and the house was ~25% smaller square footage. I have an issue with that selection. A different comparable should have been selected, even if it was one I did not provide. )

As far as the ARV appraisal, the only item I did not do was install A/C as I found some electrical issues and used those funds to upgrade the electrical service instead and run some new leads from said service to remediate the issues. Is that a 1:1 trade? Probably not, but it isn't a huge difference.

My opinion on the property was $70-80k, likely on the lower end. I did not use all approved funding through the acquisition and rehab loan because I thought it was high. I rehabbed to what I expected to be able to pull out approximately what I spend. 

A 40% swing in a 5 month window seems excessive to me. But that is just my opinion. I understand appraisers are a trained opinion of their own, and I only look at 20-30 houses a month so they have far more hands on experience than I do. I honestly wish I had their training and 1,500 or so hours in the field required, but I would still be just left with my opinion versus theirs, so it is a rather moot point.

The entire reason for my post was not to bash appraisers, or even discuss them. It was to point out that I am looking for thoughts or suggestions on remediation of my situation. Bashing anyone is just focusing on the negative and completely the wrong attitude in my opinion. It is what it is, and I just need to work towards a solution. If that solution is get a W2 job and show income for the next 3 months and go to a bank so be it. If that solution is start asking each guy at the local bar to loan me $5,000 for 5 years at 10% interest with a balloon payment, that works too! 

I just know the all of us together are smarter than this yinzer from da Burgh so keeping the situation to myself would be the worst strategy. 

Thanks for the information on how to challenge an appraisal in the future. 

I also see you are from Milwaukee. If you work with any of the HomeVestors guys there tell them I said "Hi." Had a good time with them in San Diego last week. Maybe a tad too much Maker's Mark, but still a good time. :-)