All Forum Posts by: Warren Juall

@Thomas Kareeparampil I absolutely agree! This wasn't a rehab however. All I did since purchasing was some minor cosmetic updates. I shared rent & cash flow with him, but he used market. I have a 5br 2bth unit that I rent by room, so the monthly actual rent comes in well above market. 

Shelton, CT doesn't have a ton of multifamilies. So one thing I should have mentioned while he was there was the condition of the homes I walked through when they were on market. He was used two of three comps with only exterior pics.

I'm not sure this commonly works, but I think it's absolutely worth appealing an appraisal if you see something legitimately wrong with it.  

@Thomas Kareeparampil

That's where I got the idea! I wasn't aware that they'd really consider appeals. But apparently if you make some valid points, they will change their valuation. 

Hi BP,

So as value has been appreciating, I figured I'd consider refinancing my 3-family and taking some cash out to use for other investments.

After finding the right lender at a good rate (same as I got in 2017, surprisingly), I got an appraisal. The appraisal came back $40K more than I purchased the 3-family for in October of 2017. Not bad considering few updates. However, I had already done research into what the appraisal amount should have come back at and I didn't agree. So I filled out an appeal form, stating what I felt needed to be changed. After the appeal, the appraisal came back with an additional $20K in value ($60K above purchase price). Although I was hoping for more, I was satisfied with the result.

My appeal looked like below:

I am not disputing the comps used because there is limited supply in the area. I am appealing how the value was calculated as described below:

***Income Approach

1.) Market rent for 1br, 1bth in Shelton in current condition is between $900 and $1,100 - $800 was used

2.) Currently, garages rent for $100 each ($300/month total) - this is not factored in income approach

***Sales Approach

1.) Property Conditions

a.) Appraised Property had very similar improvements to those made to Comp 1 in 2015 including a new roof, 3 new hot water heaters, 3 new gas burners, 3 updated kitchens and 4 updated bathrooms. Comp 1 also has aging siding, so nothing about exterior condition should be deducted from appraised value.

b.) Unfortunately, the other two comps used in sales approach had very few pictures in the listings. As a licensed real estate agent, I went and looked at both Comp 2 and Comp 3 when they were on the market. They had many issues, including aging burners and hot water heaters, aging flooring throughout, aging appliances, and aging cabinetry in kitchens and bathrooms. Substantial renovation would be needed to bring to Appraised Property's current condition.

c.) The condition of Appraised Property is far closer to that of the condition of Comp 1. The $40K deduction should be reduced, and there should be an adjustment made to factor the dilapidated conditions of Comp 2 and Comp 3 when comparing to my property.

2.) Sq. Feet - I am hesitant to believe that Comp 2 is 3,546 square feet, only 100 less than the 4-family Comp 3. The listing agent may have combined both living area and basement area in that assumption (as she did on Comp 3 - she was same agent). This might be worth taking a second look at.

3.) Parking - A $5,000 adjustment for a 3-car garage and off street parking where no comps have a garage or off street parking seems low. I would imagine due to the low supply of off street parking for multi families in the area, having a 3 car garage and driveway with additional space should add more value.

Does anyone have any experience appealing appraisals when refinancing? Has it worked?

Thanks!

Hi BP, 

So as value has been appreciating, I figured I'd consider refinancing my 3-family and taking some cash out to use for other investments. 

After finding the right lender at a good rate (same as I got in 2017, surprisingly), I got an appraisal. The appraisal came back $40K more than I purchased the 3-family for in October of 2017. Not bad considering few updates. However, I had already done research into what the appraisal amount should have come back at and I didn't agree. So I filled out an appeal form, stating what I felt needed to be changed. After the appeal, the appraisal came back with an additional $20K in value ($60K above purchase price). Although I was hoping for more, I was satisfied with the result.

My appeal looked like below:

I am not disputing the comps used because there is limited supply in the area. I am appealing how the value was calculated as described below:

***Income Approach

1.) Market rent for 1br, 1bth in Shelton in current condition is between $900 and $1,100 - $800 was used

2.) Currently, garages rent for $100 each ($300/month total) - this is not factored in income approach

***Sales Approach

1.) Property Conditions

a.) Appraised Property had very similar improvements to those made to Comp 1 in 2015 including a new roof, 3 new hot water heaters, 3 new gas burners, 3 updated kitchens and 4 updated bathrooms. Comp 1 also has aging siding, so nothing about exterior condition should be deducted from appraised value.

b.) Unfortunately, the other two comps used in sales approach had very few pictures in the listings. As a licensed real estate agent, I went and looked at both Comp 2 and Comp 3 when they were on the market. They had many issues, including aging burners and hot water heaters, aging flooring throughout, aging appliances, and aging cabinetry in kitchens and bathrooms. Substantial renovation would be needed to bring to Appraised Property's current condition.

c.) The condition of Appraised Property is far closer to that of the condition of Comp 1. The $40K deduction should be reduced, and there should be an adjustment made to factor the dilapidated conditions of Comp 2 and Comp 3 when comparing to my property.

2.) Sq. Feet - I am hesitant to believe that Comp 2 is 3,546 square feet, only 100 less than the 4-family Comp 3. The listing agent may have combined both living area and basement area in that assumption (as she did on Comp 3 - she was same agent). This might be worth taking a second look at.

3.) Parking - A $5,000 adjustment for a 3-car garage and off street parking where no comps have a garage or off street parking seems low. I would imagine due to the low supply of off street parking for multi families in the area, having a 3 car garage and driveway with additional space should add more value. 

Does anyone have any experience appealing appraisals when refinancing? Has it worked? 

Thanks!

@Marc Izquierdo

I'd talk to the lender and see what they'd require prior to talking to your potential private money lenders. That way you'd be able to explain in full detail what would be required of them. 

I guess it'd depend on what type of loan as far as whether they are scrutinized or not. I now see you said that you'd be using a commercial loan. You'd likely be okay with just proof of funds, and a signed note might very well work. 

The bank of course would want to see that there is adequate income to make payments, whether it is your personal income guaranteeing the loan or if it is from the LLC.

@Marc Izquierdo

I'd also consider whether the bank would allow you to used borrowed funds as a down payment. Even if they did, they'd want to source the funds. So make sure your private lenders are ready for similar scrutiny to getting approved for a loan.

Hi BP!

I own a 3-family property that didn't have its electrical panels labeled fully. I labeled what I could myself, but found a few switches that don't seem to go to anything. I left them off and tried all outlets, lights and whatnot and everything seems to be working. Is it possible these switches go to nothing?

I have to schedule the fire marshall to come out in about a week for an inspection. I want to make sure I don't get anything wrong when he checks. Can I leave those blank? Any advice would be much appreciated!

Best,

Warren Juall

Exclusive Properties

I have an accepted offer on 3 multifamily homes (10 doors total) in Shelton, CT. I am looking for passive partners on the deal. I will manage the acquisition and the properties. I am suggesting a 4-year exit plan. 

Currently 100% occupied. CAP rate at below market rent is above 11%. I am suggesting $50K in upfront renovation and saving 10% rent for CapEx. Annual return for investors is estimated to be around 15%!

I have a full prospectus prepared for anyone interested. PM me for details!

Hi Joseph,

I'm currently renting to unrelated people who are just looking for a room, although one happened to be a college student.

Thanks,

Warren

Hi All:

In October of last year I purchased a 3 family in Shelton, CT. It has 2 single units and a 5br 2bth that is rented by room. Thankfully everything has gone smoothly so far. 4 out of the 5 rooms were filled when purchased and only 1 has moved out. I haven't had any problems filling rooms as it is now 100% full. Only issue is that these rooms are month to month so there is some turnover. I have 2 moving out at the end of month (thankfully it is summer).

If anyone can share some insight on the following:

1.) Is your screening process as vigorous as a single unit

2.) Is the eviction process higher/lower/same difficulty level as a single unit

3.) Is the lease roughly the same as a single unit lease

4.) How do you deal with internal conflicts among tenants (cleanliness in common areas, noise, etc.)

Any other comments/info would be greatly appreciated!

Thanks!!

Warren Juall