Investment property appraisal

[Jonathan Beaumont]

I am in the middle of purchasing a single family investment property in Memphis and the appraisal came back 10k lower. Do I have the option to negotiate with the seller?

[Alex Craig]

@Jonathan Beaumont these guys and a lot of other TK providers do a bang out job on the renovation which can make it hard to offer at the appraisers opinion of value without cutting corners which compromises the TK providers business model. Often time I will see one of our homes that is fully renovated with new roof and HVAC is being compared to homes in the buyers appraisal that do not have the level of renovation as ours. The challenge here is the renovation upgrades performed to improve the property and ultimately position it to perform as buyers desire are not always reflected in the appraisal. I would say your other option other to TK is to find a home on the MLS being sold with a renter already in place that is priced to its current condition. You may find a home in this same area priced 20k cheaper but with older capex items, carpet and other deferred maintenance items that may need to be replaced sooner then later. Typically, the TK model if executed at a high level will reduce your risk by avoiding those big ticket expenses in the first few years, the downside is entry price to position you for that experience. It comes down to how passive you want the experience to be, how long you plan to hold and level or risk you want.

Is the difference in ROI that big with $10,000 extra down?