Is all multifamily income treated equal in appraisals? Wash, DC

[Jacob Chaney]

I run a student housing program in Washington, D.C. that sees me receiving anywhere from 50% - 100% more than normal market rents.  I have contracts in place with large universities and colleges along with a track record for my business model stretching back almost a decade.

My strategy has been to buy or build my own multifamily property believing that at today's cap rates I can really force some appreciation through my program.  However, I spoke with a local developer who has been in the business for decades and he tells me that any underwriter or bank would view my income stream with great suspicion and would not value it the same as they would conventional 12 month leases.

Does anyone have any thoughts or experience in the matter? I would love to hear from commercial multifamily underwriters or lenders out there.  I once believed that as long as it's documented and can be proven that income is income is income from the point of view of an appraiser. 

Just wanting to know if I should rethink my entire strategy.

[Russell Brazil]

Fannie Mae underwriting guidelines. You can easily read through them, as well as familiarize yourself with apopraisal guidelines for Fannie/Freddie. Even in a non Fannie Mae loans, the fundamentals of how one borrows will remain similar.  Appraisals will be done based on rents within the normal market range of rents.  If the properties were commercial and not residential, the appraiser may make note of your above market rents, but will also note what market rents in the are actually are.  

Banks lend base on factors of risk. Lending base on easily replicatable market rents lowers risk. Lending based on a business that is out performing the market increases their risk. 

You may want to consider straight business loans as opposed to mortgages.