How important is the income for SFH rental appraisal?

[David Haynes]

All of us who BRRRR properties have probably come across this problem. Our goal is to refinance as much cash out as possible, but sometimes there's not enough data to support the appraised value that we hope for.

I'm currently selling two single-family home rentals in the suburbs of Philadelphia for $110K. They will easily bring $2,200/month in rent after basic updates (flooring and paint) and cashflow $8,500/year after all expenses.

The problem is... there are not many two-bed homes for the appraiser to compare them to when you go to refinance them. Given the income, they should be worth $200K. However, since they are single-family homes, the appraiser may not give that much weight to their income. 

There are only three or so two-beds in the same zip code that sold on the MLS in the past year, none of them within a quarter-mile. If the appraiser were to look at them as income-producing properties, I'm all set and should be able to refinance all of my cash out.

So my question is, how much weight (if any) is the appraiser likely to place in the income-producing aspect of the properties? What has been your experience? And have you ever found yourself in a similar spot while analyzing a deal?

If little to no emphasis is placed on the income, thankfully I'm only leaving $10K cash at most in equity which I will recover within a year. If the emphasis is placed on income, the opposite is true. I'll be pulling out $10K more cash than what I put in.

[Dan M.]

Every appraisal I have ever gotten has taken it two ways, the income approach and the comparable sales approach. Bank takes the LESSER of the two.