4plex rehab and appraisal guidance

[Daniel Rubenstein]

Hi all, I can use some help on my first fix and hold/flip. Its a fourplex i bought at 155K. I had it appraised when I bought it and bank valued it at 170. Ive done most of the rehab already (about 25k). Im trying to get the value of the property up to the point where I can recover all my rehab expenses and most if not all my down payment. So I hope to do cash-out refi when its all fixed up and rented out. Another unit, same model 4plex, in not as nice condition as mone, just sold for 230 (but its the highest comp in the area right now) There are some last items that I cant decide if its worth replacing. I have no clue what effects the appraisal on a 4plex (i know i should have figured this out before buying and fixing the property...but i learn from my mistakes). Does the appraisal go by the total income on the property? The condition on the property? For example, im trying to decide if I should replace all the vanities (48inch ones @ $400/piece) or just paint them and replace the faucets (they have granite looking formica on top in decent condition). Will this make much of a difference on a 4plex appraisal? (So far ive replaced all flooring with laminate, repainted all walls, granite counters and painted cabinets, stainless steel appliances, and new outlets etc. around the place) Btw, its in a B area (almost a C). (For those that live in Vegas its near UNLV/and airport.) Any guidance here would be immensely appreciated!! TIA

[Clint Dorris]

Most 4-pled appraisals will be done on the 1025 form, which will look at both the Income Approach and the Sales Comparison Approach.

The income portion will use rental comps (they will actually need to call other owners/managers to get real rents on real properties) to establish market rent, but the appraiser could also use your actual rents. Then, the appraiser will determine a Gross Rent Multiplier (likely using sold 4-plex prices divided by market rent or their actual rent). This GRM will be multiplied by your Actual Rent to come up with an Income Value. They will also likely run a depreciation schedule and calculate expenses and vacancies. This portion shows the lender if there is enough cash flow to cover your payments.

The Sales Comp Approach will show actual sold comps and adjust them for differences in size, age, condition, and location as needed. The grid portion also breaks down each comp by sold price per room, per bedroom, per unit, per foot. The appraiser can see these prices for all comps and determine which one is driving the market. They can use any of these numbers to come up with the value, or they may just use the adjusted comp prices. I tend to look at it all because adjusting for size and age makes less difference on a 4-pled than rooms or bedrooms. Renters don't usually care about 100 foot difference. 

Hope this helps. If not, call or message me.