All Forum Posts by: Cole Puterbaugh

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

 where is this?  60k per unit it better be in the best of the best areas and FULL 100% renovated. I just picked up a 7 unit, all in 220k.fully renovated.  I also am looking at 2 duplex and SF in Akron on same lot, rented for 3300, PP 125k,, about 30k total reno. You need to stop, as you need a team, your realtor is NOT part of your team. 

All the best 

@Cole Puterbaugh

Just curious. Did you decide to purchase this?

Having an exposed, untreated 2x4 at the bottom of a bathtub for molding/support is not good at all. That will warp/rot pretty quickly. If they did that, I question their workmanship mentality elsewhere.
Poor build quality means surprise repairs, sometimes simultaneous. Again, speaking from experience on this. 

Did the appraiser verify it was truly a triplex and took that into account on its evaluation or did he simply compare it to other duplexes?
I’ve been in homes where they say it’s a triplex but it’s an attic where you can barely go in with a mattress on the floor and vented port holes.

Quote from @Cole Puterbaugh:

Quote from @Andrew Weiner:

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

I'm trying to understand why you would purchase a property so far over appraisal if there aren't supporting comps?  It sounds like you are overpaying unless I'm missing something.  Also I would be suspect that they have cash offers.  If the offers were close most sellers would take a slightly lower cash offer over having to deal with a mortgage.  

Sometimes a bad appraisal ruins a decent deal, sometimes it stops you from making a bad deal.  

 The reason is cashflow. The triplex cashflows at +$700/mo, and that's a very conservative number.

But to more closely answer your question, I'm not purchasing a property so far over the appraised value. I want to ensure that 1) the appraised value is accurate, and 2) I want to determine if there is a workaround since this is my first go-round.

Cleveland is a great market for cashflow! This sounds like a good investment...  but you make money when you buy, not when you sell. Good cashflow doesn't necessarily justify overpaying $40k, in my opinion. 

Quote from @Cole Puterbaugh:

Quote from @Corby Goade:

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

 Are you getting advice from your agent and lender? There are some really great strategies available to you when you get a low appraisal- that can truly be a gift if you know how to work it. 

I'm in contact with them daily, but as for advice, the conversations are more like "What do you want to do in this situation, Cole?"

I like my lender and my agent - especially my agent. But I do get a sense that more experience could have made this a lot smoother.

Good feedback about the influence of the actual purchase and the appraiser on the value of the property.

People think all real estate agents and lenders are the same, just filling in blanks...until there's a problem!

Here are the highlights of what I do in these situations as an agent:

-Call the listing agent and spend 5 minutes going on about how great the house is, how much my client loves it and how they can't wait to move in...then I say "there's just this one hiccup- it didn't make appraisal, so the lender can't fund the purchase price. We have no choice but to send you an addendum to the contract for the appraised price so this deal doesn't die. I am really sorry, this is just a crappy situation for all of us, I really feel for the seller."

Then you send the addendum and wait. And then you wait some more. 

If your agent has written a solid contract for you, you should be able to tie up the property for a while and the longer you wait, the more leverage you have. I did this exact thing on two transactions last month and saved clients $20k and $50k. 

There's a bit more strategy to it than that, but but a good agent will use this opportunity to get you a discount of some sort. 

Best of luck!

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

 Are you getting advice from your agent and lender? There are some really great strategies available to you when you get a low appraisal- that can truly be a gift if you know how to work it. 

Quote from @Luka Milicevic:

I just can't believe you can buy a triplex for 177k!

Cleveland market, sir. There are currently 32 multifamily homes in that price range.

@Cole Puterbaugh

I believe I found the home you are under contract.
It's green with new carpet, windows, granite countertops, cabinets, etc. All with the protective film still on it. Looks like they went with the ultra cost effective route on upgrades but they're still upgrades.

They purchased it for $55k in 06/22 and they want $177k now for the updates + profit. 

Questions:
1) Is that a beam of marble or a beam of wood at the bottom of the tub? If marble, looks like a scrap piece. Not knocking it but I bring this up as potential clues to the quality of their work.
2) Will the lender approve your loan if the appraisal is that much less than asking?
3) When interest rates lower in a few years, will you be able to refinance it as you may be underwater on your loan?

With that said..

1) Is getting another appraisal with it knowing that you've seen comps lower too?

My vote is "No". That's the appraised value, even with their upgrades. They probably put it up on the market thinking this is what their sweat equity is worth.

2) Cash flow +700/mo conservatively? Take into account repairs + maintenance. 
This market appreciates slowly. When you sell it, it may go for under this purchase price.

Personally, I would state "I can't go beyond the appraised value" and otherwise walk. 
However, if you're getting it solely for monthly cash flow and are ok with the risks (underwater loan, can't recoup when selling, etc), then proceed and enjoy your first rental!

Quote from @Cole Puterbaugh:

Under contract for a 3-unit mfr in Cleveland. My first purchase. 

Purchase price is 177K.

Appraisal is 138K.

I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.

Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...

I'm trying to understand why you would purchase a property so far over appraisal if there aren't supporting comps?  It sounds like you are overpaying unless I'm missing something.  Also I would be suspect that they have cash offers.  If the offers were close most sellers would take a slightly lower cash offer over having to deal with a mortgage.  

Sometimes a bad appraisal ruins a decent deal, sometimes it stops you from making a bad deal.