STR APPRAISAL VALUE FALLING SHORT

[Mya Toohey]

Hello all,

I recently had this happen, I have a client working with a great lender doing a DSCR loan. We paid at market value for the house and the value appraisal came back great.

Fast-forward to today- appraiser said the he hates STRs amd will not appraise value on DSCR using STR numbers only long term, which in this case tanked the the loan. So, we had to move to a bridge loan, lender said he could close it 3 days, mind you we found out appraisal value the day before last week. Is anyone else seeing this? I am in the Tampa Bay Florida area, specifically, this property in Saint Petersburg. Any recommendations for a good STR appraisal would be greatly appreciated.

[Jonathan Taylor]

@Mya Toohey I have not seen any appraiser who will value a SFH based on STR income. It's not a commercial asset so property income is irrelevant to value. This a residential asset and comparable sales will be the main valuation indicator. DSCR lenders are case by case on how they value a STR. The lenders I work with suggest the best way is to run long term rents and base the loan on those numbers. STR is, in its nature, unpredicatable, which lenders do not prefer. I get these calls all the time " but Airbnb is X% return a year, why can't a lender lend on that?" Because is not reliable, it is not how a 1-4 asset is valued, it is not smart to base a long term loan on a short term variable unstable income.

The lenders I have who DO lend on STRs still use comparable sales to determine value and if the operator has two years of operating history, then that helps to put the borrower into a STR specific loan. But in this market, with travel being up and down more than before, more and more lenders are not willing to take the risk no matter how much the vested parties talk up the returns.