All Forum Posts by: Eric Fegan

@Paolo Ruggieri

Check out the Appraisal Institute website. The education is the best commercial RE education available. AI will teach you everything about getting to the NOI but nothing below NOI.

The CCIM courses are also exceptional but different than AI courses. CCIM introduces below the NOI line analysis taking into account debt and taxes since individual investments are based upon below the NOI analysis as each investment/investor is different.

Both organizations provide a wide variety of courses that can help grow your knowledge of a variety of topics depending upon your educational interests.

Another CRE appraisal educational option is the American Society of Appraisers but I don't have any personal experience with those courses.

I work with Keith and Associates in Covington, KY.  They are real estate and business specialists and they are active in both KY and OH.  If interested send me a PM and I can provide contact information.

@Dave Foster. Thank you. I had not considered option 2 which seems to be my best option.

Does anyone know if you can complete a 1031 exchange if you sell a property but carry back a small second mortgage? For example, if you sell a property for $1mm and receive $900k in cash and carry a second mortgage for the final $100k how does this affect the 1031 and tax consequences? For purposes of the example, assume a 600k adjusted cost basis. Would you exchange out of the $900k portion but pay tax on the final similar to an installment sale.

Great question and one that I have been interested in. My wife and I are both self employed real estate professionals with two young children. We pay about $1200 per month for a relatively high deductible plan. We have a personal policy which I have been told is not tax deductible (that may be income specific but not sure) but if we move to a company plan it would be tax deductible regardless of income levels. I remember paying $187 per month for my personal insurance policy out of college before a family. Does anyone with employees use a company plan as a corporate benefit to employees and for the tax deductibility of your own plan? We are in KY. Would love to find out what others are doing?

Kurt Schuepfer You are welcome. I agree that starting with SFR or 2-4 units is a great place to start and learn the rental business. That is how I was taught and am still doing while building up to larger assets. You also have significantly more supply of properties to choose from and can use the government backed loans initially to get started.

Christopher B. Sorry for the delay. I haven't figured out how to follow discussions. With the asking price being less than market GRMs then you likely have one or a combination of the following: 1. A difference in utilities paid between the subject and comps. If the subject pays more in utilities than the market comps then the subjects GRM would be lower due to more operating expenses eating up the gross income than the comparable properties - check the utilities paid for other comparable properties. 2. The subject in inferior condition or cap ex needs compared to comps Or 3. You have a good deal. Use the GRM based Income Approach on single or small multi-family properties as a guide to reconcile with sales comps. The GRM approach ignores expenses but if all sales considered are the in the same neighborhood and are similar then the differences in expenses should be minimal.

As an appraiser, we would likely use both the Sales Comparison Approach (comps) and the Income Approach. The SCA has been discussed in this thread by why not use the Income Approach. For a 2-4 family property or even a small multi-family up to 10 or 12 units, use a Gross Rent Multiplier. Stay with a monthly multiplier to make the max easy. For example, If the sale price is $100,000 and the gross monthly rents are $2000 the gross rent multiplier (monthly) is 50. As long as your sales are in the same neighborhood, have similar number of units, and the same utility payment structures (water, electric, heat, etc), this GRM approach from an income standpoint will give you a good range of values. You should find that your comps have a fairly narrow range of GRMs and that differences in GRMs can be explained based upon differences between the properties like condition, location, bedroom count, etc. Take the market GRMs and then compare to the market or contract rents for your subject property and this will give an Income Approach value. Compare the Income Approach Value and the Sales comparison approach value based upon which Approach has better and more relevant data and then you have basically done an appraisal

Greg W. You are welcome. Once you get used to the terminology and what is needed you already have all your reports in PDF format and you can send all of that information in 10 or 15 minutes. The loan application and process is much, much easier than purchasing an owner occupied SFR.

Greg W. Commercial appraising is my day job. Ideally I would like to have three years of operating data, 3 years of tax returns, current rent roll, list of any improvements or any recent Cap Ex. If you use a standardized lease, a copy of any lease would be fine. If leases differ, then all leases would be needed. Some appraisers will be more or less difficult but in general this is the max amount of info someone should need for a 7 unit