Is a single family home valuation altered or adjusted if its operated as an STR?
In my case, a home I am looking for is above market rate, and their justification is that is should be valued like a commercial property with past revenue and net accounted for.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
2y
Interesting idea. There are lots of flaws with the argument though:
1.By nature STRs do not have long term contracts with their "tenants".
2. Depending upon the local laws, it may be possible that any similar property could be a STR just by a few clicks of buttons to post it online. The barrier to entry is low.
3. If you're planning on financing the purchase, the lender will hire an appraiser. Part of the appraisal is an income analysis, but the appraiser still has to reconcile the income approach with the other two approaches to value (cost and sales comparison).
I think the property would have to be incredibly unique to make this argument.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
2y
It's logical but will only appraise based on comparable sales and, if it's an area with few STR sales in the past 12 months, it will appraise just like an owner occupied home.
Lender · Austin, TX · Member since 2021 · 447 posts · 441 votes
2y
Anything 1-4 units is valued off the sales comp approach, so no, income does not factor in. Anything 5+ units is valued off of the income approach, but I would check with your lender before going out and getting a 5+ unit STR. Most lenders won't do this property type, and some will also value it based on LTR market rents.