HELP, I might lose financing due to low rental appraisal FHA
I'm afraid that tons of low rent nearby is going to risk me getting low rental appraisal on 4 family FHA loan. The street the house is on, is DRASTICALLY different than 98% of the area, so the market is complex.
I found the most amazing deal ever. Beautiful home with amazing views. Great area and everybody is so friendly there too. Area is surging right now due to a lot of people coming in and buying property cheap and renovating. Case in point, house I'm trying to buy was asking $200k more than last year's sale price!
Here is the deal. The street the house is on is one of the two most desirable streets in the area and 98% of the area is completely different. 3 blocks away you have vacant and sketchy and crime. Where the house is, you have low crime, beautify tree lined streets and views of mountain/river. Also there is only a hand full of rentals there, any unit for rent on these streets would be RARE to find and the only one available and that will be available for some time. The area in general has people on waiting lists (not just good area) and most units seem to rent in 2 weeks (which tells me the rents are even too low in bad area. I think finding a good tenant should take at least a month if prices right).
So you have almost NO data on the prime real estate area and tons of data in sketchy areas, which means an appraiser needs to extrapolate theoretical values. Now there is SOME data, but it's slim pickings and there is only one example in MLS. Most people are renting on Facebook or some private site. There are are probably 6 listings that are at the price I need, including the top unit in the house has a new lease at a price that works, but that data needs to come from local property management, home owners or real estate agencies.
So if the appraiser just runs MLS search, they will come in $200-$300 under what I need for self sufficiency test, based on the noise of the sketchy parts of town, dominating the data. The only way to properly appraise an area with barely any rental data at all and very few units, it to be aggressive in finding what little data there is, which means going beyond MLS and speaking to real estate companies and property management that DO have rental data not seen on MLS. Then you need to extrapolate from that, because even thier data will not give full picture as the market is moving very quickly. Transitioning from people who bought over 5 years ago with tiny mortgages, to new buyers who will pay twice as much.
I don't think appraiser will do this however. I think they will just look at MLS. The one good thing going is that one unit in the house that is ALREADY at a price it needs to be, in defiance of what MLS says. However, that unit looks amazing post renovation. The rest are not renovated, so they might take off a couple hundred for the other units, claiming they are not as nice even though I'm renovating them all.
If I do a renovation loan, will they appraise rents based on renovation value?