All Forum Posts by: Brad S.

Quote from @Dalton Dillon:

I'm looking to purchase a duplex using the BRRR method. I'm concerned about the ARV due to there not being any comps in the area. Even as far out as 1 year. My question is - How will an appraiser appraise the property without there being any duplex/triplex's sold within the last year? My agent even went as far as going over to the next city/town which is pretty far out and still nothing. Will the appraiser use singe family comps since a duplex is still residential?

Dalton, I have written about this in length in previous responses on BP, but I will try and be relatively brief here. First, my background is a ~27yr certified appraiser, RE Broker, investor, etc., so I have a very good perspective on this subject. This response is predicated on the experience, skill and knowledge of the appraiser assigned, but an experienced, knowledgeable and skilled appraiser "should" do the following.
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Ok, here are my typical approaches to a complex assignment.

1) determine the most important value characteristics within my subject market (location, school district, # of units, size, lot size, bedroom/bath count, remodeled, new build, specific style, other amenities, etc.)
2) research available comparable sales (with those important characteristics found above) within the designated market area
3) in the absence of recent good comparable sales, I will expand my search back in time, even 5 years (or more) if need be. I will choose the best comparables to use and then do a market analysis to determine any time adjustments required. Example, if my data suggests the market appreciated 10% since a comp sold, I will then adjust that comp up 10% for differing market conditions. I am not limited by when a comp sold, if it makes sense.
4) I will also look beyond the Subject's market area and find any reasonable comps. Then i would determine if there is a market difference in market areas. So, if I found properties sold for an average of 10% more in the comp area, I would adjust that comp down 10% to compare it to the Subject's area. I have gone 10+ miles for certain complex properties (and I am in a pretty densely populated area).
5) I may also use a a triplex and try to determine an adjustment for the 3rd unit, to deduct that from the comp. But, similar to an sfr adjusted up for a 2nd unit, this is typically not the most reliable method. I have used this only for additional support, but not relied upon for final value.
6) And then adjusting any found comps for all the typical characteristics (age, size, location, etc).

Those are the basics.
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Here's some additional appraiser brain droppings, not included in the "brief response".

Assess the important characteristics of the Subject property, in relation to the market. In other words, what are the Subject's characteristics which the market seems to place value on (i.e., specific location, gla size, lot size, specific amenities, remodeled, etc, etc, etc). The appraiser should generally try and rate those important characteristics in order. Example, if the Subject is located in a highly desirable school district where buyers pay more to be in, then that would probably be a very high desirable characteristic on a buyer's wish list. Therefore, comps (comparable sales) should be researched with that in mind.

Basically, as an appraiser, I am not limited to any specific rules or regulations when it comes to picking my comps, deriving my value opinion, etc, as long as my method/s or reasonable, credible, and supportable. So, yes, I can use an sfr sale and adjust it to the Subject, if I absolutely feel a need to. But, that is isn't typically reliable or advisable. And the income approach is not typically reliable, since 2-4 unit property rents typically vary widely, depending on many factors, and the grm's (gross rent multipliers) will reflect that, therefore, causing a wide range in values. Generally, many 2-4 unit properties are not purchased for their income producing abilities alone, as much as larger multi-unit properties are. This fact creates a more wide range of conclusions. But, yes, there are times when those methods do help to support the valuation of a complex assignment.

And a VERY IMPORTANT CONCEPT I learned very early on in my training, I (an appraiser) don't tell you what the value is, the Buyer/s (market data) tell me what the value most reasonably should be. An experienced active investor (or realtor) in a specific area, will typically know more about what their customers (buyers) want, then many appraisers. Appraisers should reflect values, not determine them.

Quote from @Mike Juergens:

HJTA is sponsoring an effort to fix California’s Prop 19 by restoring the ability to transfer property to children upon the parent's death WITHOUT reassessment and WITHOUT the often HUGE increase in property tax.

They are collecting signatures via petition to get this on the ballot for this November 2024.

This week is the deadline to return a petition. You can download it here:

https://reinstate58.hjta.org/

It includes instructions - but in short:

You must (1) print, (2) sign (in BOTH the signature area, and the circulator area below it), and (3) mail it to HJTA. They must receive it by Feb 19, so that means most in California need to mail it by Feb 15 at the latest.

 Thank you for the info. I sent mine yesterday! 

@Lisa H.  More info would be needed for an opinion on your specific situation/goals, etc.  But, generally, my thinking is to sell it and find a trustworthy syndicator, where you can park the money for true passive income. This is meant only as an example, but I personally know of 2 specific funds, very trustworthy and experienced, that are paying between 8-12% preferred returns with projected  returns higher.

Unless, you want to be more active in your investing or do more direct investing. In that case, I might cash out now, since you probably have a low tax liability, and then find turn key out of state properties with good growth potential and more landlord friendly, than CA. Your cash flow returns would be lower, but the growth potential might be better.

@Roger Lim

Hey Roger, what area of LA county are you in?

Quote from @Savannah Walbert:

Quote from @Gary Mascitis:

Hi @Savannah Walbert

Congrats on making the decision to start! In the current state of the market, it is very hard to find great investment opportunities in most areas in California. California also has more favorable laws towards the tenant rather than the landlord bringing up even more headaches. Have you looked into commercial DSCR or Fix and Flip loans? These loans are focused on your credit score, lease vs principal interest, taxes, and insurance, and liquidity position for qualification and do not require tax returns or W2's. This may be the best option for your situation as it would not limit the leverage or terms you would qualify for with your 1099 income. In regards to areas to invest, everyone above me gave great recommendations for markets to invest in. Another point I would add is to look at areas where you have interest in visiting and do your due diligence on the market. If the market checks all your boxes, it could be the best case scenario. Lastly, I am a direct lender on the products I mentioned above and would be more than happy to discuss further over DM if you're interested!

Best of luck,

Hello @Gary Mascitis! Thanks so much for the thoughtful response. We have spoken with a couple mortgage brokers briefly about some of our different options for financing, but haven’t yet fully dived into it. These recommendations are great.

As for choosing a market we have interest in visiting that is also something we are hoping to be able to accomplish, we have a work opportunity that would put us in Tampa Florida about 7-10 days per month, so we are looking there and at the surrounding area to see if there’s anything that could work. Hoping to find a market with solid appreciation over the next 10-20 years!

Hi @Savannah Walbert,

I really like FL as a growth market. There's a lot of reasons to. Some of those reasons are: Continued consistent population growth, which translates into a large amount of wealth moving in, the still relatively affordable median home price, high job migration, no state income tax, relatively reasonable property taxes, business friendly.

There are also some reasons to be cautious, like increasing insurance costs, threat of weather incidences, the cash flow returns have decreased due to the significant increase in prices over the past few years. 

But, still long term prospects are good. I bought a new built rental in Cape Coral a few years ago as a result of an exchange I did. I wish I would've bought more. Anyway, I would buy a newly built property, due to the more updated building codes, which help keep it safer against the hurricanes, etc. Mine had very minimal issues after that recent hurricane hit, since it is newer built and the updated building codes and higher elevations required, etc.

Anyway, I would make sure to go with a reputable and trustworthy operator/builder and focus on turn-key deals, especially for your first step in your RE journey. I am happy to refer you to the investment company and builder I went through, just sent me a DM if interested. They used to be local to LA, but they have been investing out in SW FL for decades, and moved out there permanently a few years ago, due to the CA investing landscape. I have been following them and doing business with them for over 2 decades and trust them implicitly. That is one of the most important points of working with anyone.

Anyway, good luck and let us know what direction you go in.

@Robert McCormick

I quickly looked up some info for Sussex County yesterday and was going to post it here, but then realized that was for Sussex County, DE, so, obviously not applicable.

Anyway, it seems like you already found some info on the appeals process. I did find this very helpful info from Sussex County, NJ, that I encourage you to review. I looked it over briefly, but it seems to be pretty detailed on their methodology and includes really helpful tips in the front pages. It is titled 2024 Tax Appeal Package. I'm guessing you saw it, but here it is just in case.

https://www.sussex.nj.us/documents/taxboard/2022/2022-tax-ap...

Also, I suggest possibly contacting an tax appeal company prior to talking with the Assessor. They may be able to provide some quick and free guidance of questions to ask the Assessor when you speak with them. And per the Tax Appeal Package, an Expert Witness needs to be qualified and approved by the Board, but read all that in the Appeal Package.

Good luck and let us know how it goes and if you need any guidance.

Quote from @Robert McCormick:

Hi @Brad S.

Thank you for the thorough advice. Contacting an outside appraisal company that deals with tax appeals, seems like it may be my best option for me. I will need to figure out when the window to appeal is, and I plan to ask this in my meeting next week.

I obtained a "property record card" via email from the town today which details their analysis. It appears they used the a "Residential Cost Approach" rather than a comparable sales one, so I'm curious if they gathered comparable sales data at all. Would I still be able to appeal this using comparable sales,even if they used a cost approach to value the property? 

Yes, you should be able to appeal. My guess is they used the cost approach, since they may've had limited comp data (little or no recent similar sales). But, specifically ask them if they did a sales comparison approach and if not, why not.

What county is the property in (I assume it is in NJ, but what county)? Also, I am assuming it is a sfr?

Hey @Robert McCormick,

I can offer some general helpful advice, but not too specific since I am unfamiliar with how your state handles property taxes. But, I started my appraisal career as a deputy assessor in the largest assessor's office in the country (Los Angeles, CA). I also have rentals in multiple states and have done tax appeals on my properties, including 2 in TX last year.

My general advice would be to contact a realtor or appraisal company that deals with tax appeals. Since you are "new to real estate" you may benefit from professionals who are more experienced and knowledgeable about the process and valuing in general. Get their opinions and see what their fees are and it may be worth having them help you when the time is appropriate. Which may not be now, depending on the appeal dates.

More specific advice would be: To obtain the data (comps) the Assessor used to value your house (they typically have to provide that info to you legally). Fully research those comps (mls listings, photos, comments, possibly interview market participants-buyer/seller/agents), and detail why those houses are not similar to yours (i.e. superior quality, recent remodel, larger lot, larger gla, superior market area/neighborhood, etc), and provide data and analysis to that data and apply market adjustments to them as appropriate. And also do your own research of comps and provide any comparable sales which you think are more comparable to your house and detail those characteristics, also providing objective data and analyses showing that. 

You need to keep in mind how they assess values and what their effective date for the valuation is. Some Assessor offices will only use comps within a certain time period prior to the effective date and will not even consider a perfect comp which sold 1 day after, and some assessors will consider sales within a limited time period after the effective date.

And of course, all this is contingent on if you are still within the appeal period. 

Anyway, if you aren't familiar with the general valuation process, the assessment process, and appeal process, it may be better to have an experienced professional help, as I mentioned above. Good luck.

This is why there is the saying "location, location, location." Based generally on what you are saying, the location has a good potential, coming relatively soon. So, that's a positive and it sounds like you can benefit from that by figuring out a way to hang on until then. 

So, my suggestion is to go back to the good 'ol forgotten CRE (creative real estate) roots. I would think about doing a lease-option sale. Pull some of your money out with a loan (figure out what # works), and offer the house as a lease-option, where a current unqualified tenant/buyer may be interested in the potential opportunity to purchase the house at some point in the near future (12-24 months).

Typically, they may be more willing to overlook some issues, like current transitional neighborhood, etc, they sometimes have enough cash and other non-descript income to afford a non-refundable option consideration payment, along with somewhat higher than market rent, which would hopefully cover your holding costs. Since they are a tenant/buyer, they may take better care of the home, since they feel an ownership interest in, you can agree that they take care of most of the maintenance issues, and you can agree to sell at the future market value at the end of the option period and not below a specified #. Actually, you can craft the deal anyway you want and alter it as needed depending on the feedback or lack thereof, you get. Another benefit is you open up to tenants that never thought they would be able to qualify to purchase a home and you could help them do it and they are happy to pay you more.

Anyway, an option to consider. There are lots of details on lease-options around, you could do an inter-webs search if that is of interest. I also may have some older stuff to share if you are interested.

Hey @Savannah Walbert,

First of all, you both seem to do very well, even for LA. 1099's do not necessarily limit your financing potential. I have not had a W2 in decades and am able to get financing just fine.

Next there are reasonable opportunities everywhere, including LA. I recently got 2 lots for under your combined annual income (each), that I am planning on turning into good money making potential. And they are walking distance from me (In the general LA area). Those deals do take more knowledge, experience and other resources, but it is possible to find deals even relatively close to you.

The most important point is to get clearer on what your goals are. To just want to get into a "solid first investment property," is too general. Same with being open to single ... multi-family, long term, medium term, or short term deals. All of those have their own unique characteristics and potential outcomes, and some totally different than the others. One example is that short-term rentals are more of a hospitality business then a property investment.

I'm guessing there is more to your comment, but just investing in markets because they are "decently priced," may not get you closer to where you want to go. 2 of my first investment properties were very "decently priced," and had great annual % returns, only to cost me money to sell 18 years after purchasing them (no appreciation on values of rents and required fix-up to sell,, etc).  ....Although, they contributed to my education, they did not directly assist in moving me toward my goals.

There are many previous posts in BP (do a search) with good blueprints of how to get clear on your goals. But, generally, assess where you are now and where you want to be in the future (i.e. how much time you want to put into managing your investments, wanting $10k monthly passive rental income with little hands-on work, running a short term rental business in a vacation community, etc.). Imagine yourself 5-10-15+ years in the future and "where "do you want to be, etc, then go in reverse to today and decide what steps to take to set you in the right direction. And that probably would mean you guys doing more research and education to help clarify which path to start on.

Otherwise, you may be a dingy drifting on the RE ocean looking for your elusive perfect island to discover.