Purchase Price and Appraisal Differences
Recently, I had a few appraisals done on properties in an area that produces good cashflow at the price of the quality of the properties. I don't care about the quality much, as I will never live in the area. I care about the cashflow, and I am in no way counting on appreciation. With that being said, two major problems came up.
1. The appraisals came back at about 80% of my purchase price. This is a major, major red flag to me. I do understand that some appraisers take into account short-sales, low cash purchase numbers, and might have subjective comps in their methods, but going into this will put me underwater from the get-go. How much stock should I put into the appraisal price?
2. This kills my buying leverage-based strategy, as my financier only covers 75% the lower number between appraisal and purchase price. Because of the low appraisal, the bank will be lending me a lot less money than I originally intended, and now I might have to drop one or two of the properties, which changes everything. Is there any way the appraisal numbers can change without me having to pay for additional appraisals?
Has anyone been in this situation before? What did you do?