Low appraisal - BRRrR Strategy challenge...

[Joel Palmer]

Hey guys!

I recently bought a 4-plex of townhomes for $130k.  It was grossing about $1750/mo and fit all my criteria, and overall looked like a great deal, so I moved forward with the purchase.

My strategy so far has been following the BRRRR strategy of buying a property cash, fix it up if/as needed, get tenants in, and get a traditional mortgage on it. Usually they'll appraise for a bit over what I purchased so I can essentially get all my cash back out of it and do it all over again.

Well this property just appraised for $98k, so the most I can get out of it is right around $80k, meaning I have to leave $50k of cash in it!  Not cool!  Granted this means my payment will be a bit lower so I can essentially pay it off quicker, but it really puts a damper on things.

Have you all dealt with a low appraisal?  Are there ways of getting better appraisals, or other ways of getting my cash back out of it?

Thanks in advance!

Joel

[Andrew Syrios]

What do you think the properties are worth? $98,000 sounds cheap for a 4plex. Is it possible the appraiser used bad comps or didn't take the rehab into account? You could argue with the appraiser or ask the bank to hire a new appraiser (we were able to do this once by showing the first appraisals to be junk). If you're really convinced this appraisal is bad, but the bank won't budge, you could try to get the loan with another bank and just go through the whole process again. 

Appraisals are a bit of a wildcard in the buy and hold game, that's for sure.