All Forum Posts by: Account Closed

Well, banks are often wrong and they don't determine true valuation. The bank's appraiser is a human and one appraisal is often different from the next, so banks don't know the true value of a home. Just because I said that I believe a bank will use comps in determining the lending amount doesn't mean I believe banks are the absolute arbiters of a home's value.

A home that consistently gets a higher rented isn't a situation that I would call "randomly nominated." Something is worth whatever someone is willing to pay for it. If someone buys a home, then the purchase is the value of the home regardless of whether you think they're "stupid."

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But, I don't doubt that a bank is going to go off comps.

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Well, I don't doubt your expertise or experience but it seems many esteemed brokers differ with you. I know a few realtors who have both commercial and residential licenses and are instructors at real estate schools who teach that a single family rental has cap rate. I also see some websites that refer to rented single family homes having cap rates, as well.

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There are varying answers and opinions on this issue, it seems. My broker is both residential and commercial broker and he said a single-family home as a rental changes the value and it's according to the Cap Rate for the area. Also, when I had my single family home rental appraised, the appraiser included 2 appraisals -- one as a residential and the other as an investment property.

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Originally posted by @David Faulkner:

Agree with Jeff's answer. No. And that answer makes sense because houses are residential property, not commercial property ... as such many of the buyers are not investors but retail buyers looking to use them not as a rental but as a primary residence. Most retail buyers looking for their primary residence could care less what cash flow the property could produce as a rental, and this can actually benefit you on the sales side since a retail buyer will likely be willing to pay more for the property than a typical investor would.

However, it is still possible to do "forced appreciation" on a single family home ... if you buy a property well and then remodel in such a way that the remodel brings it up to the standard of the rest of the neighborhood and the resulting after repair value (ARV) increases the property value more than the remodel cost, then you have earned a profit (though the profit may not be realized until you sell or refinance) ... this is how professional flippers derive their profits, but the same exact process can be used by buy and hold investors. I've "flipped" every single house I've ever purchased, it is just that I flip it to the rental market instead of the sales market, but I still benefit from the forced appreciation same as flippers only with a much lower tax rate.

Yes, but you're assuming I would market my rental to families looking for a primary residence when I wouldn't. I would market it to an investor.

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Originally posted by @Jeff Shelton:

Anything less than 5 units, the value is based on comparables, anything above 5 units, value is based on NOI. So the answer to your question is "No", your SFR does not go up in value when you raise the rent.

So, according to that logic, the home could get $2000 in rent, and still would be the same value.

If the $100k home with $1k rent provides NOI = 7% of value and the home suddenly gets $2k in rent and a NOI = 14%, you're saying the value stays the same? If I'm an investor and looking for 7% return, why wouldn't an investor be happy to pay $150k to get a 10% return on this property?

Theoretically, a home could get $10k a month in rent and still be worth the same as it did making $1k in rent.

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Let's say a Single Family Home was bought for $100k and rents for $1000 (GMR = 100)a month. If I am able to get $1,200 a month, wouldn't that raise the value of the home to $120k , using the same multiplier?

I have heard some say that it does and some say that it only applies to Multi-Family. But, as an investor, if you're able to raise the rent and get a better return, it would make no sense to say the asset is still worth the same as it was at the lower rent.

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Well, keeping the place meticulous is great. Best of luck.

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Glad to hear that he's settled down, though

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All Forum Posts by: Account Closed

Account Closed has started 18 posts and replied 52 times.

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Does raising the rent on a SFH raise the value?

Post: Who Pays For Ant Control in SFR?

Post: Who Pays For Ant Control in SFR?