Purchasing a converted Single Family House for short-term rentals

[Leon Lee]

Hi, All BPers

I am looking at a property near an airport. I have quite a few questions and wonder whether I could get some help from the forum:

1. 1. The property is originally zoned as RSF single family home. But the current owner changed it to a triplex. When I pulled the tax record, I didn't see any permits. What are potential pros/cons of buying those properties converted without permits?
2. 2. I assume that when bank does the appraisal, it will still treat it as a single family house and uses the comps to appraise. Is that correct? Should I use the nearby recently sold SFH as comps or use the income generated from the property to do comparative market analysis?
3. 3. When I check the square footage of the house claimed by the owner vs. that on the tax record, there are quite a big difference, i.e., 1600ft vs. 1200ft. I assume that the current owner probably enclosed porch or converted garage into bedrooms. Which SQFT number should I use to do CMA, as they could come up with quite different prices?
4. 4. The house is currently being rented via Padsplit, which seems to generate higher gross income than LTR. What is the rule of thumb to calculate the returns for rentals on Padsplit?
5. 5. If there are 6 single family houses that are sold as package, do I have to use commercial loan to purchase them? How will banks appraise the value of these houses? Does it use comps or income? I assume it will use comps, but would like to confirm.

Apologize for so many questions, but STR on converted single family house is new to me and it seems I have tons to learn!

Happy Investing!

Lee

[Paul Sandhu]

1. Zoning.  I remember in my college town (Carbondale Illinois) the city zoned certain parts of the town that prohibited 3 or more unrelated people from living in those certain parts.  That basically eliminated college students from living in residential areas where normal families lived.

2.

3. They are going to appraise it as a normal rental, not as an STR.

4.

6.

7. Your monthly rent as a LTR should equal your weekly rent for an STR.

8.

10. There were 2 guys walking down the street and they saw a male dog licking himself.  One guy said to the other "I wish I could do that."  The other guy said "You'd better pet him first, he might bite."  You'd better "pet" your approach to doing STRs or it might bite you.