How to comp an unusual property

2 Replies

How would one go about establishing the value of an abnormal property?  Being new to this scene im not sure how anyone would go about coming up with the value of it. Last year I purchased this 1 acre with a 2000 sqft brick house and 6 mobile homes for $150k (owner financed after I put $30k down). It was very run down and only 3 trailers rented. I put $150k into it with repairs from personal funds as well as through 0% credit cards. Im going through the process to refi now and was just going to get the loan to pay off the seller ($105k) and $50k worth of materials financed. This of course leaves $100k of personal money tied up in it. Reading more on BP it looks like I should try to cash out my personal funds so when the next comes along I can have it on hand to buy and repeat. As of today the property is pulling in $4750 a month and will be closer to $6000 after I finish the reno on the last unrented unit. Problem is finding anything close to be able to comp it with. Most of the mobile home parks that have 6-7 units are beat up and run down. 3 of mine are newer with all new appliances, hvac, floors, walls, roof, ect. The house was gutted and remodeled with granite, tile, wood, ss appliances, ect.  Anyone have any ideas to break this down so the bank does not compare it with some run down park and say the value is not there or its too risky?

Ultimately, it's going to be up to the appraiser, who will be hired by the lender*. 

(*You could also hire your own appraiser, just for your own edification and for some degree of checks and balances. The bank likely will not use this appraisal and will require their own, but that doesn't mean you can't provide a copy to their appraiser as a reference, assuming you like the results of course.)

There are three different appraisal methods:

1. Comparable sales approach (most commonly used for residential single family homes)

2. Income approach (more commonly used for rental/income properties)

3. Replacement cost approach (not used as much, but sometimes used for new construction, or in unique cases like yours and/or to add some support to the other two methods)

The appraiser may use a combination of these. For example, she might use comps on the house, and income on the trailers, then support both with a review of replacement costs.

In both of the scenarios above, anything you can do to front load the appraiser with data points is usually helpful. You have to be tactful in the way you present the information (you aren't telling them how to do their job, you're providing them with information/data they might not otherwise be aware of). 

For example, you might put together a packet of information for the appraiser that includes comps for the house, and detailed info on the competing trailer parks you mentioned - highlighting the fact that the other trailers are in much worse condition that yours, how much they rent for compared to yours, etc. 

The more I think about it, the more I like the idea of paying for your own appraisal in advance of the bank's - if you're paying for the appraisal for your own education and information, you should have a little more latitude in spending time with the appraiser, asking questions, and providing the appraiser with information. 

And if the first appraisal comes back solid, you can provide a copy of it to the bank's appraiser when the time comes, along with the same data & info you provided the first appraiser. The second appraiser won't (and in fairness, shouldn't) just duplicate the first one. But they can certainly take it into account, use it as a point of reference, and review the approaches used by the other appraiser. You should not expect to see a huge swing in value from one appraiser to the other, if they are done close to the same time (the second appraiser knows this, of course, and would perhaps keep that in the back of their mind). 

One the other hand, if the first appraisal comes back low. You have no obligation to share it with anyone. You paid for it and it's your document. You are free to shred it and roll the dice on the second appraiser.

I appreciate the advice and that makes sense.  This property has been such a pain when it comes to financing (but guess that’s why I got such a good deal and no one else was able or wanted to get involved). After speaking to more lenders it does not sound like it will ever get easier due to the trailers. So basically I think I may just hammer down the payment and get it paid as quick as I can then enjoy the $6k cash flow a month.  The next one I pick up will be a multi family all in the same building or all trailers without a structure, not a hybrid like this one.   

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