All Forum Posts by: Hady Farag

@Brent Coombs

“ how do you expect to make money out of it? Are you relying too heavily on it being "a great and growing part of Newark", rather than what it's worth now?”

I’m relying on rental cash flow which is what’s important to me. I’m not focused on the 1% rule since it doesn’t apply here but cap rate is 7.25%.

“Are you borrowing the typical 75%, or are you relying on cash flow by borrowing less?”

Not at all. I'm actually going the FHA route (10% downpayment) because I didn't want to put such a large downpayment, but after further talks I may need to switch over to conventional.

“I'm guessing you intend to live in one of the Units, so that the income of the other two Units ameliorate your living expenses? If so, your monthly outlay might still be more than if you rented the same unit instead, right? ie. Not ideal (to put it mildly).”

I’ll have 2 roommates that have already committed to paying me what the minimum market rent is ($900/each). So technically I am still collecting rent from my unit. I don’t plan on staying there for more than a year either.

“Did you put a financial contingency in the Contract (so that if you can't borrow enough, you get your deposit back)?”

How would something like that look like? We did add wording into the contract that stated “The buyer will contribute a maximum amount of $10000 to cover any potential underappraisal”

@Michael Plante Sorry to hear that Michael. How did you work things out at the end?

@Patrick Britton thank you for taking a moment to respond to my post.

“You think it's reasonable to compare brand new construction with something built over 100 years ago? “

I did forget to mention that the house had a fire in 1990 and was rebuilt completely that same year making the home 30 years old from the date of rebuilt. I don’t think the appraisal is aware of that and the brand new foundation the house has is proof of that. From your experience, do you think that would any impact?

It seems logical to think that a newer home is more valuable than an older home. But I don’t think that’s always the case. Let’s say there are two 100-year-old homes, one of which is extensively remodeled and the other is in its original state. To compare the two properties without making an adjustment for the difference in effective age would be wrong in my opinion.

@Jonathan Greene

Thank you for your response. I agree, after speaking it over with a few buddies it definitely seems sketchy. The comps were all 3 units with 3br/2ba, but it’s interesting to see that he didn’t take into account another 3 family that’s 308 feet away that sold on 3/2021 for $660k (one of the units is a 2bd/1ba while the other two are 3bd/2ba). Granted, it is a newer build compared to the property I’m looking at (2006 vs. 1918) but from what I understand that shouldn’t have much of an impact on the appraisal. What are your thoughts?

Hello BP,

First time home buyer here and need some insight/advise on my current situation. I'm currently under contact on a MFH for $650,000 and had an appraisal come back at $475k, approximately $175k under that price. My agent is going to see about challenging the appraisal but It sort of threw a wrench into my plans. Does this happen often? I'm a bit concerned because I also don't want to be underwater on a property that I fought to have the appraisal adjusted when in fact it's only worth $475k. Here's some more information about the property and what appeared on the appraisal;

• It's a 3 unit with 3br/2ba in each unit that can rent between 1.8k-2k ($5,400 revenue total)
• Located in Newark, NJ in the University Heights area - a great and growing part of Newark
• Appraiser used comps of 5 recently sold homes from $425 - 500k yet there 16 more comps in the area that were sold for 585k and more

Any advise on how to deal with this lower appraisal would be much appreciated. Thank you BP fam!