All Forum Posts by: David Whartnaby

If the property is for sale, you should be able to ask the listing agent or owner (FSBO) for the financials - they hopefully will provide you with all the information. If they don’t, that would appear to be a red flag. Taxes and much additional property information is available to the public: you should be able to find it online or by calling the county/city assesors.

@Ryan Swan under those circumstances, no, the valuation would probably not change much. The original appraisal should take into account that in a quick period of time you could raise the rents to market. Therefore, the appraiser would take this into account on the form.

Things get stickier if a tenant is locked into a below market rent for a significant amount of time. In that case, how much should the property be discounted from an appraiser's point of view? This doesn't appear to be your case though.

Appraisers use a gross rent multiplier to determine the income approach in small multifamily properties. They do this and not CAP rates because they don't have access to all of the necessary expenses to calculate an accurate NOI. Is the landlord paying electric? Heat? Snow removal? Etc... oftentimes they end up comparing apples to oranges without all of the necessary expenses.

So, can use raise the rent and increase value? It is might be possible, but it is unlikely. Much of it depends upon the fact that you hypothetically bought the property for cash. Did you base YOUR analysis and negotiate the deal based upon comparable sales or the income that the property was previously generating?  I think that really is the key to the equation.

Congrats! Sounds like you made some wise decisions and found some great deals! Now I need to find a real estate agent like yours!

I am am currently training to be an appraiser, so I'll answer this the best I can. Most clients (more often than not banks) will require the appraiser to do the assignment on the Fannie Mae 1025 form (https://www.fanniemae.com/content/guide_form/1025.pdf). The form requires the appraiser to input comparable sales and also active rent comps. If you "jack" the rent up (even if you find a tenant willing to pay it), typically the appraiser will not give credit for additional value above and beyond what market rents would determine. The appraiser might also deem the cost approach applicable, usually if the building is 5 years old or less. The appraiser will reconcile all applicable approaches to value used: sales comparison, income and/or cost in order to determine a final valuation of the property. This process of reconciliation can be weighted anyway the appraiser subjectively determines is most accurate. 50/50 20/30/50 80/20 whatever... Hope this helps.

Hi all, properties can be expensive and saving substantial amounts of money takes time. I would like to buy a multi family property but am realistically a year or so away from saving enough money. I will not be house hacking as this is not an option at this point. What are some options to help grow my down payment money faster than having it just simply sit in a bank making virtually no interest? How liquid should I be vs. investing in stocks among other things which pose inherent risk as well? Thoughts?

Way to go! Would love to see some numbers!

Courtney Joseph The numbers refer to how much did you pay for the property. What loan to value is the bank willing to work with. The numbers refer to all of the $ involved in the deal. From an appraisal standpoint, I can give you a couple of thoughts: 1) If the appraiser determines that the highest and best use of the property is a single family residence and not a rental, I am not sure what your best course of action may be. However, by increasing your rent, if the best use of your property is deemed to be a rental unit (and not a single family residence) then the value of the property will increase. If the opposite is true, then the increase in rent will be deemed irrelevant. An appraiser though determines value by the day that they inspect the property (generally). So, the original appraisal probably does not factor in the increase in rent for August. So, I would ask you... if you were to sell the property for the highest amount possible, who is most likely to buy it? A family to live in it or an investor who wants to use it as an income generating property? If the answer is an investor, then I would recommend waiting til August 1st with a new signed lease in hand. If not, I am not sure what would be the best route. 2) Zillow is not always accurate. Not saying you are wrong about the 65k value but just something to consider... Good luck!

Have you tried another bank? Credit union? If you can find an entity to keep the loan in house, you should be able to get an "in house appraisal" done which is usually less money (at least in my market - Fargo). Also, did you provide the appraiser with the new lease so that he could reconcile a new valuation using the income method based upon your future signed lease and not the current one? In theory, as an income producing property, the rents should have a large weight in the valuation of the property. What are the numbers?

Eric Mauricio Terry Zannella hey guys, I am also fairly new to the RE game and live in Fargo. I'll be heading to the Fargo Meet Up on July 10th (tomorrow). I have attended a couple now and look forward to meeting more people and expanding my knowledge. Hope to see you guys there. If not, we will have to set a time and get together for sure.

Here in Fargo, wood foundations are fairly common. They can be made when it is too cold to pour concrete. Having said this, it is usually the cheaper housing market that seems to have a wood foundation. You can research the Red River Valley for further specifics about the clay content (although I know there is a fair amount of clay).