All Forum Posts by: Mark Vejnar

Visit your city and county governments. Find out what's going on in the development office. Spend some time in the housing office and ask about redevelopment, urban renewal, etc. At the planning office ask about the future plans for the city. Make note of the locations discussed and then start driving those neighborhoods. Get copies of the local realtors real estate contracts and re-write the paragraphs in laymans terms. Understand the implications of each paragraph.

Kyandrea Fowlkes Where are you in Virginia? You can get all that information from the city/county offices. Visit the municipal center with the address and get the parcel number, and then look up anything and everything associated with the parcel number. You'll find all kinds of stuff. Virginia being a caveat emptor state - it's good to do this in person. Also get to know your locale's municode site. It'll help you identify glaring code violations which will help with negotiations.

@David Faulkner that's ok. It's good advice and worth repeating. I have to tell my kids anything at least three times before it even gets their attention. 

Hi Veronica R. My wife just finished residency here in the upstate. I'm assuming you matched for a program at GHS? We were amped up and ready to start investing when we first moved to the upstate. From personal experience I'll caution you both to not underestimate the commitment of time, focus, energy, soul, and self-respect that is residency. Start IBR right away, submit your PSLF forms annually, and become a great physician. Return to RE investing once you're board certified in your specialty. It's difficult to serve two masters. You've come this far and you'll reap amazing rewards on the other side of the coming crucible by staying the course. Your husband is a different story. Get involved in Upstate CREIA. There's a meeting on Monday, April 18, at 6pm. It's at Embassy Suites on Verdae. If you're not too busy in your current rotation maybe you can both come and check it out.

@Greg Mucha

Not much to add to @Dawn Brenengen and @Bonnie Laslo comments. Sorry that you're going through that. It's all about the data. Appeal and bring your a-game. Bulletproof comps, records of improvements, rental data - attack all three approaches. Order an appraisal review from an MAI or SRA. Go through it line by line with the help of an experienced appraiser you trust. 

@Greg Christensen

I have to second @Rajeev Kotyan. You should each get your own appraisal. Perhaps you could contract to split the difference? That way you are somewhat insulated from a lower value and the tenant from a higher value. 

@Craig Lessler

That's interesting. I'm surprised it came back $33,500 below contract price as a contract is typically proof of arms length negotiation. Did the appraisal state why the value was that much lower?

Or are we talking a $MM property where $33,500 is negligible?

@Joshua Smith

I think you've got a great plan. Do you have a Realtor you know and trust? Do you have MLS access? Are you using custom MLS searches with boundary lines around your neighborhood? - that way you know about all relevant MLS activity. Ask that each search is duplicated for rents, commercial, land, residential and multi-family.

Have you been to the planning office yet? Visiting and getting to know the planning people can be very important. In fact it's hard to understate the value of understanding your municipalities government offices. Going online may get a few things done, but meeting people and getting to know them has a tendency to work in your favor - especially in a highly political town like DC. Many departments have ways for you to be notified of each new incoming project or decision. I'll let your imagination run wild with that. 

Imagine if you could have bought land in Orlando when Disney first started applying for permits. 

DC will only get hotter as we continue shifting to a centrally planned economy.  Have you considers borrowing or partnering with foreign banks, institutions, or investors (along to lines of Lloyds of London or the bank of Thailand, etc.)? The dollar is so weak, and foreign investors so active, you may find a great long term partner looking to invest in DC. 

@Steve S.

I'm not an appraiser anymore but I was back then. 

It's not that we were super aggressive back before '08; it's that buyers and sellers were shaking hands on crazy prices. Appraisers knew the bubble was unsustainable as early as 2004 - and we discussed it at syposiums, forums, continuing ed courses, etc., but we are not regulators and can't stop people from making decisions that financially ruin them. Appraisers can only formulate opinions based on and supported by available market data, and the market is a manic-depressive bipolar sociopath. 

@William Hochstedler well said. 

@David Greyshock wait are you saying the appraisal value is higher than asking price? I know some turn-key guys sell below appraised value. I'll say that (even it goes without saying) if you are able to purchase a property below appraised value then go for it! Just be sure you read the report, do some due diligence on the appraiser who signed it (call some peers) and be sure the price is below all three approaches: sales comparison, income, and cost. Also be sure to thoroughly read the addendum as this is where the bulk of analysis and explanation takes places. 

@David Greyshock

The hard and fast rules of the stock market will only serve to benefit you here. 

I think what we're talking about is the law of diminishing returns. The bulk of any home's value is derived from its location. The surrounding land use, housing trends, level of upkeep, etc., impact the intrinsic value of a given location. Subsequent to location are age, style, and condition - not necessarily in that order. Once a firm understanding of the structure and its place in the local economy have been determined we can then proceed to approaches to value. 

It is possible for a house to be completely renovated and for its value to remain constant when performing a sales comparison approach. If there are no renovated comps, there is no way to calculate, from a sales comparison perspective, how much the market is willing to pay for the renovations performed. However, we can observe that renovated homes may sell faster, which can this render a time adjustment - but time adjustments are tricky requiring lengthy explanations in the addenda. 

For turnkey you will be far better served by disrgarding (or minimizing) sales comparisons and focusing instead on income and cost. 

Renovations that are already complete increase your NOI as you don't have to pay for them moving forward. Obviously you'll have maintainance expenses moving forward, but they should be less on a renovated structure.

Renovations also reset the clock on remaining economic life - fundamental tony he cost approach. This changes depreciation in your favor - talk to your real estate focused CPA. Get a detailed list of the renovations for your records to justify the calculations. Also ask the appraiser to show you what record of renovations is in the work file (all appraisals have a "work-file" that is maintained by the appraiser) and make sure all work was considered from a cost and income perspective. 

Therefore, the big ticket items should be accounted for, but not necessarily from a sales comparison standpoint.