All Forum Posts by: Nancy Jenkins

Are bank appraisals for loans on commercial property typically lower than comps? I have commercial property that comp'd at $44,000. I decided to sell it quickly for 1/2 price just to move it fast for $22,000. The bank for the buyer came back with an appraisal of $25,000 on this property. I was surprised. Comparable commercial property is a worse location sold for $44,000 just 2 months ago. Are banks' appraisals usually low? If so, do banks appraise low to keep the seller from backing out of a deal when he realizes his property is worth alot more than he is asking? Thanks for any input.

Thank you, Scott.

Scott,

Thank you so much for responding to my post. To answer your questions:

Your current LTV is between 78-82 which places you in the comfort zone for most commercial lenders, but I assume your market assessments are based upon after repair values and not as is values. TRUE

I further assume that this property is not cashflowing at the moment, and if this is the case, this will be your largest obstacle. TRUE

Why did cash flow projections go from 14,000 to $800/month? I was told by a local banker that if I rehabbed the house into a daycare center, I would have a difficult time borrowing money. He said that a bank looks at their own "risk". He told me it was less "risky" finding a renter or buyer for a SFR than to find someone to purchase a daycare center, in the event I go under. This property is zoned for either: residential or daycare, church, etc. The banker (not my mortgage broker) suggested that I sell my commercial property; put $20,000 towards rehab, $20,000 down payment for refinancing and the balance in the bank. Tried to sell it for a couple of months, but haven't sold it yet.

So my plan changed. I decided to use the commercial property as security for a loan and just put the thing back together and make it rental property – thus the $800/month rental. I thought this would help me get the home refinanced easier. My current monthly payment is $700 – due to go up to $800 in December.

I would prefer to convert it to a daycare. Even with a small number of children (12) I could pay my employees, draw a salary, cover all expenses, including the house payment and still net over $2,000 a month. I guess the banker scared me from following my original plan.

A smaller daycare that is licensed for only 20 children is up for sale in Knoxville now. She wants $425,000.00 for it. My place is bigger. My space can handle 35 children (net $14,000 a mo.) and I have enough land to expand and even build more facilities in the future (2 acres).

But I have to do something soon...something smart. Thanks for any suggestions.

Thank you, Mac. I will follow your advice. Are you in this area?

I own 2 adjacent lots of property near downtown. When I purchased these I visited our Metropolitan Planning Commission to find out the best use for these lots. The city planner showed me my lots were zoned commercial. They wanted me to build an office complex. Yesterday I went to get a secured land loan on these lots based on their commercial value. The loan officer looked up my property from some records and said the lots are zoned residential. No way. Where does a loan officer get their information for zoning? Obviously, the records he checked are incorrect. Tried calling - passed around 7 different departments. One lady told me taxes on all land w/o a building are taxed residential, even though it is in a commercial zone. She suggested the lender call the MPC themselves. Somehow I don't think they will go to the trouble. Does anyone have a suggestion for me?

I bought a house in 2004. Paid $99,000. Owe $94,000 today. It should appraise now for around $115,000-$120,000. In 2004 I was rehabbing it to be used for a daycare center - $14,000 cash flow per month. During the rehab (gutted out almost completely), I was in a bad car accident. It has been sitting gutted since Nov. 2004. I need to finish it and refinance it. I was unable to work in 2005 & 2006, so I cannot produce W2s for the last two years. I do have commercial property (FMV $40-$50k). My broker recommends that I get a rehab loan and put up the commercial property for collateral for a $20,000 loan, then finish the place. After the finish, the plan is to pull the equity out of the house to pay off the rehab loan and then refinance with a 30 yr. fixed rate loan. It is on an ARM. It will cost $5,000 to pay off this loan early. I plan to put it back together to rent out now. It should rent for around $800 a month. My credit is good - 700's. No late payments. I do have another mortgage. Will I have a trouble getting approval on a 30 yr. fixed, since I cannot produce W2s for the last 2 years? If so, do you know of another way to finance this place. I need to do something with it. Thank you for any advice you can give me.

Nancy

I live in beautiful Knoxville, TN. We love football. We love playing (and beating) the Florida Gators, too.

Thank you. That gives me a standard to go by.

Can anyone tell me what a good interest rate will be on a rehab loan? What would you consider too high. What would you consider a great deal? Also, I have some commercial property valued at $50,000. Would you suggest I put this up for collateral for this rehab? I need around $25,000 to do the rehab.

Thanks,

Nancy

I am a newbie from Knoxville, TN. The excellent information on this site has helped me with a couple of properties that I have been sitting on for a while. I appreciate the wisdom and knowledge brought to the forums. Your willingness to share has helped me alot. Thank you for taking time to interact and provide sound advice. As I progress in my RE investments, I hope to provide others with insights that will help them prosper.

If anyone needs help in this part of the country, let me know.