BRRRR strategy: A Love Hate Relationship

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BRRRR strategy: A Love Hate Relationship

Tyler Haskell
Investor · Antelope, CA · Member since 2014 · 59 posts · 21 votes
Does anyone else see the same major flaw of the mystical BRRR strategy? At the end of the day, arguably the most important element or phase of the BRRR process is the refinance to get your exit money. And the appraisal from the lender of your choice is the single event that tells you whether you successfully complete the BRRR. Along every other step of the journey YOU have control. You research the ARV of the property, you project the rehab costs, you pull comps, you negotiate purchase price, you oversee repairs, you rent it out, and then likely, you wait for your purchase to season and then initiate the refi and hope to get your cash back (assuming you purchased with someone else's money, otherwise it's immediate). This is where suddenly the control and your fate is pulled away from you and put in the hands of an appraiser. These appraisers are most likely not investors, and most do not even understand the concept of buying discount properties. So while I prepare a nice packet for them with my rehab, how I acquired it discounted, and what I think it's worth, at the end of the day you have to hope that they will agree, other wise your coming up with the difference in the 75% LTV. I understand you can order a re appraisal and try to get it fixed, but at the end of the day this is still a wild variable that you really cannot control, only influence to the best of your ability. And the experience will be different every time! Anyways, I do it, I still think it's one of the best investing strategies out there, but i wanted to see if anyone shared the same nerves I get when ordering these appraisals for a refinance!
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Jacob Murphy
Contractor · Cincinnati, OH · Member since 2015 · 92 posts · 75 votes
9y

@Tyler Haskell

Great insight here to the struggles of BRRRR investing. I do feel the same way, you are at the mercy of the banks at the end of the day. My first BRRRR killed me because the appraiser didn't consider 1 of the 3 bedrooms to be legal since it was too small. That put me with the 2 bedroom comps of the area which were pathetic! I had to leave 20K of my own money in the property. Totally knocked the wind out of my sails.

The only solution I have come to is to work with a small local bank that only uses 1 appraisal company. I then have that appraisal company come out before I do any rehab, tell them exactly what I plan on doing, check what they recommend for the highest ARV. From there we have an understanding of what I want to do and what types of comps I will be compared to. When it comes time to do the cash out refinance, I specifically ask for the appraisal agent that consulted me before doing the rehab. I bring him/her out before the tenant moves in (just in case they want something else done for best appraisal) and hope that they appraise close to what we agreed to before the rehab.

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  • Jacob Murphy
    Contractor · Cincinnati, OH · Member since 2015 · 92 posts · 75 votes
    9y

    @Tyler Haskell

    Great insight here to the struggles of BRRRR investing. I do feel the same way, you are at the mercy of the banks at the end of the day. My first BRRRR killed me because the appraiser didn't consider 1 of the 3 bedrooms to be legal since it was too small. That put me with the 2 bedroom comps of the area which were pathetic! I had to leave 20K of my own money in the property. Totally knocked the wind out of my sails.

    The only solution I have come to is to work with a small local bank that only uses 1 appraisal company. I then have that appraisal company come out before I do any rehab, tell them exactly what I plan on doing, check what they recommend for the highest ARV. From there we have an understanding of what I want to do and what types of comps I will be compared to. When it comes time to do the cash out refinance, I specifically ask for the appraisal agent that consulted me before doing the rehab. I bring him/her out before the tenant moves in (just in case they want something else done for best appraisal) and hope that they appraise close to what we agreed to before the rehab.

    11Reply
  • Erik Martin
    Aurora, CO · Member since 2016 · 15 posts · 6 votes
    9y

    This is a great strategy! Have you found only smaller banks have 1 appraisal company, or do larger banks have only one appraisal company as well? Do you ever feel over leveraged with this strategy, I really want to start, but I am worried and I am going to over leverage myself! 

    Thanks, 

    Erik

    1Reply
  • Steve K.
    Denver, CO · Member since 2017 · 265 posts · 234 votes
    9y

    @Tyler Haskell ,

    Yes, just this week.....I was ready to throw something! Appraiser ignored the list of 8 favorable comps I shared with him, picked his own and came in at 90% of my conservative expected ARV. Was going to cost me leaving an extra 10% equity....when I wanted the full 75% LTV on my new ARV.

    Fortunately, I composed a 3-page letter w/ detailed explanations on comps and formally asked my mortgage loan officer for a "re-consideration of value". To the appraiser's credit, 48-hrs later, he acknowledged and used the comps I found, raised is appraisal by 17% (was 107% of my expectations; wow!) and left me an apologetic "I screwed up" voice-mail.

    @Erik Martin , I learned the BRRRR method 18 months ago....wish I had learned it 30 years ago.

    Get inspired by recent successes.....here are 3 examples:

    Read some real life case histories of , and did in 5, 2.5 years and 7 years, respectively, buy using BRRRRR

     

    For buy and hold rentals, there is a continuum of perspectives. I know of one widow in Denver who put her life savings into a $225k rental duplex...paid cash, no loan/leverage. Has just one property and is thrilled that it cash flows and there is no mortgage payment. Thrilled that it has doubled in value in 7-8 years (Denver appreciation has been great) and she's averse to debt. She is truly a real estate investor....but on the conservative (not comfortable with debt) end of the continuum.

    Others could have taken that same precious capital and invested it in 4 similar properties, with 25% down payments and 75% loans/leverage, and controlled $900k in property that doubled to $1.8M by now. They'd be wealthier, because they used 75% leverage. Admittedly, if a nationwide recession hit, and property values and/or rent dipped 15 or 20%, this person is subject to loosing 15-20% of $900k in properties, rather than the widow's 20% of $225k.

    Then, if you use the BRRRRR method, the cash-out refinancing, once you have enough equity (usually through remodeling the property, but sometimes through market appreciation) allows you to ideally grow a portfolio of rentals with 100% financing....and zero of your precious equity left in the property.....I know of a BRRRR investor that turned $80k cash into 30 rental properties worth about $8million ($5million in loans, $3million in his equity) in 5 years....granted, he bought at the bottom of the 2006-08 recession and benefited....but much of it was the buy at a discount and remodel profit.

    Then decide if the risk/reward is right for you.

    You can say "look what I did with low leverage" (slower)....or "look what I did with maximum leverage" (faster). Good luck!

    8Reply
  • Erik Martin
    Aurora, CO · Member since 2016 · 15 posts · 6 votes
    9y

    I agree about leverage totally!! Where did you guys find your contractors to fix up the places, and how do you normally estimate the budget it would take to rehab a place (this seems like the hard part to me)? 

    0Reply
  • Tyler Haskell
    OP
    Investor · Antelope, CA · Member since 2014 · 59 posts · 21 votes
    9y
    Jacob Murphy Thanks for this feedback, glad I'm not the only one! I never thought of tracking down the appraisal company from the bank on the FRONT end and trying to beat the problems before they start, great advice and I will check into that. I invest out of state so I also have less of an ability to meet people on site etc, but I'm sure I can find someone to do it for me.
    2Reply
  • Tyler Haskell
    OP
    Investor · Antelope, CA · Member since 2014 · 59 posts · 21 votes
    9y
    Steve K. Wonderful insight thank you! If I run into this similar situation I will be sure to write some strongly worded letters and submit my evidence. I am glad to hear anyone's strategy on how they are able to overcome this Human element in the process.
    1Reply
  • Tyler Haskell
    OP
    Investor · Antelope, CA · Member since 2014 · 59 posts · 21 votes
    9y
    Erik Martin Rehab can be complicated. Especially if you run it out of state. Over time and with experience you will be able to look at a destroyed house and at least fairly accurately guess the cosmetic rehab for the house. That being said, there are frequently unseen problems, and inspections/GCs are the way to find them. I suggest establishing a relationship with a knowledgeable general contractor, and have him estimate rehab for you. I would also note that it is important not to waste a contractors time by asking him to give you repair estimates for properties you do not own yet. Once or twice may be fine. However these are busy professionals and it takes a lot of time to prepare a proper rehab estimate!
    4Reply
  • Erik Martin
    Aurora, CO · Member since 2016 · 15 posts · 6 votes
    9y

    So would putting a house under contract and then having a general contractor come in after that to estimate the reno before you close a frowned upon practice? Then you normally run comps for similar houses in the area to determine what it would be worth full renovated? 

    0Reply
  • Amy A.
    Portland, ME · Member since 2012 · 616 posts · 550 votes
    9y

    I had this problem too.  Appraisers can't seem to see past what I paid for it a year ago.  Interest rates are also sometimes higher for cash-out refinances.  I have decided to keep my flip and long-term hold projects separate. 

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    A few thoughts ... I may be off base, but it sounds as if you may be attempting to convince the appraiser to see things through your investor eyes rather than fully understanding and looking at it through their perspective and then tailoring your message and product accordingly. Especially if this is residential RE we're talking about ... the appraiser does not and should not care how you acquired it ... he/she does not and should not care how much money or effort you put into it ... he/she does not and should not care what the place could rent for ... the only things that matter are the sold comps. Are they indeed comparable and what did they sell for? That's it ... that is how you best tailor the message and configure the reno to end up with the result you want on appraisal.

    Now, granted, there are still some dumb@$s appraisers out there that can still screw it up for you even if you did everything right ... that is why you need to keep multiple profitable exits and sufficient margin of safety to cover any such unforseen events ... for example, if you are leveraged to the hilt on hard money prior to refinance then any little hickup in any of the steps can put you over the edge, and sooner or later you're bound to get burned ...

    2Reply
  • Robb AlmyPro Member
    Investor · Fredericksburg, VA · Member since 2014 · 123 posts · 65 votes
    9y

    I'm a little bit confused about any bank using one appraisal company/ contractor.  Is this because you are getting a portfolio loan?  If not a portfolio loan, I thought any conforming/ conventional loans had to be handled through an appraisal management company (third party) that randomly selects the appraiser from a pool of appraisers.  Can someone explain.  Thanks!

    0Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    9y

    I see what you're saying, but aren't you always at the mercy of the appraiser no matter what you do? When you buy, refinance, and sell, an appraiser is involved. It's not just BRRRR. Anything you do is going to have that "flaw". BRRRR is nothing more than flipping a property, but instead of selling it, you refinance it and rent it out. Of course there are various methods to it, but in a general sense, that's all it is.

    If you are using financing through a bank, when have you ever done a deal of any type or method without an appraiser?  And before people give me examples, just remember, I'm not trying to cover every single possible deal ever made in the history of real estate, but 99% of the time, an appraiser is involved no matter what you do.

    0Reply
  • Patti Royster
    Investor · American Fork, UT · Member since 2014 · 28 posts · 4 votes
    9y

    We are in the midst of a long 4-plex BRRRR and are turning it into an AIRBNB. How long do you think we should bring in income to the property before refinancing it? Is 4 months long enough? Never done this before. I'm guessing we just need to keep accurate records of our occupancy/income to show. Anybody have any advice? Hoping to get the appraisal as high as we can to pull out as much as possible. We closed off the back porch and it has a closet and a window but it's tiny. I believe in our market it has to have a window and a closet to count as a bedroom so I'm hoping maybe they will count those two units as a two bedroom. Getting excited to make some $$$!

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Justin B.:

    I see what you're saying, but aren't you always at the mercy of the appraiser no matter what you do? When you buy, refinance, and sell, an appraiser is involved. It's not just BRRRR. Anything you do is going to have that "flaw". BRRRR is nothing more than flipping a property, but instead of selling it, you refinance it and rent it out. Of course there are various methods to it, but in a general sense, that's all it is.

    If you are using financing through a bank, when have you ever done a deal of any type or method without an appraiser?  And before people give me examples, just remember, I'm not trying to cover every single possible deal ever made in the history of real estate, but 99% of the time, an appraiser is involved no matter what you do.

    The main difference as I see it is with a buy with financing you are in escrow, normally with an appraisal and financing contingency ... so, if the appraisal doesn't come in, then you back out and don't close escrow, or the seller agrees to lower the price to appraised value, or you bring extra cash to the closing table to cover the difference ... you have options. With a BRRRR, you already own the property by the time you get to the refi R ... you are past the point of no return, your purchase and rehab costs are already sunk, and you can't back out if the appraisal doesn't come in. That is a big difference in my mind.

    1Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    9y

    First off I know the BRRRR strategy works because we have through our own investing here in CT and have had clients execute this strategy time after time.

    With that said, and as some have mentioned, you will probably not get rewarded as much as you think you should on the back end appraisal for the overall condition of your property and how well it is performing. That is extremely frustrating no matter how many times you've done this. Completely maddening. 

    What I recommend to people is go into the deal being ok with being 5-7k into the deal after the refinance. That is still a home run in my  opinion. You have an asset that is performing well and all of the deferred maintenance has been taken care of. You will get that $5-7k back within 18-24 months, maybe even sooner. Obviously you try like heck to get all of your money out, but sometimes things like an appraisal can come and bite you in the end. If you were to buy that property retail as an investor you would be into it for a lot more than $5-7k. 

    If you end up $10k plus into a property on the back end after the appraisal you just valued it wrong. Learn from it and move on. We had this happen to a property we BRRRR when we first started. Appraisal came in low. We kept it as a rental, sold it a year and a half later, and made a solid profit. The good thing about buying a property that fits the BRRRR strategy is you have multiple exit strategies on the back end.

    0Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    9y
    Originally posted by @David Faulkner:
    Originally posted by @Justin B.:

    I see what you're saying, but aren't you always at the mercy of the appraiser no matter what you do? When you buy, refinance, and sell, an appraiser is involved. It's not just BRRRR. Anything you do is going to have that "flaw". BRRRR is nothing more than flipping a property, but instead of selling it, you refinance it and rent it out. Of course there are various methods to it, but in a general sense, that's all it is.

    If you are using financing through a bank, when have you ever done a deal of any type or method without an appraiser?  And before people give me examples, just remember, I'm not trying to cover every single possible deal ever made in the history of real estate, but 99% of the time, an appraiser is involved no matter what you do.

    The main difference as I see it is with a buy with financing you are in escrow, normally with an appraisal and financing contingency ... so, if the appraisal doesn't come in, then you back out and don't close escrow, or the seller agrees to lower the price to appraised value, or you bring extra cash to the closing table to cover the difference ... you have options. With a BRRRR, you already own the property by the time you get to the refi R ... you are past the point of no return, your purchase and rehab costs are already sunk, and you can't back out if the appraisal doesn't come in. That is a big difference in my mind.

    That's a fair point, but I also think about it this way. If you are doing BRRRR, you are probably also a buy and hold investor. Let's say you bought that $100k house, and have $70k into it and need that $150k to get all your money back. If the appraisal came in at a value that only let you get $125k back, then you should have a house that you have $25k in that you can rent and get a decent return. It's not much different than a normal buy and hold at that point. But like any real estate investment, there is always risk. If the appraisal comes in so low that you can't get much of your money back, then you've done a bad deal. And yes, I agree with you there is no "contingency" in a BRRRR Appraisal. You can't say "Oops, looks like I put too much into it, let me get that money back and walk away".

    You just have to do your due diligence up front to assure (as much as you can) that you will be able to get most or all of your money back. Again, it's no different than a flip. A flipper who is trying to sell the property is at that same "no contingency" appraisal as a BRRRR. It's just part of the game I guess.

    And to answer your question, I don't think anyone "likes it", but it's just part of it.

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Tyler Haskell Yes it can be frustrating when an appraisal comes in low.  We purchased a 3/2 in Phoenix that had a guest house in the back that together brought in $1300 a month in rent.  We bought it for 102k from a wholesaler and expected it to value at 125k.  However, it only came in at 107k so we were not able to get all of our money back out of this one.  

    Our strategy is a little different though and it does help us get more of our money back out of the properties.  We sell our properties on lease options.  So with this property, we are selling the property to one of the renters who comes in with an option fee of $5,000.  The option is a 5 year option which will sell for 121,000 in 5 years.  During that time they can sublet the back house out and that house can help them pay their lease.  Also with our upgrades, and the tenants upgrades,  appreciation, and a more realistic appraisal, in 5 years, the property will most likely appraise for higher than 121,000 making it easier for them to get a loan for the property.

    Another way we get some of our money out of the house is to sell a second performing note on the house at a good interest rate - usually 11-12%.  If no one buys the note than I just buy the note in one of my other businesses.  

    Here are the numbers:

    Purchase price 102k

    Total in after closing costs, hard money costs, and other holding costs 109750k

    Dumb appraisal came in at 107k

    Loan 82,500

    Option fee 5k

    1st months rent 1300

    Second performing note 21k

    Our all in is around 150 together so 75 each between my partner and I.

    Monthly rent 1300

    Taxes, insurance, servicing 130

    No cap ex because it is on a lease option

    Monthly cash flow 422 split between my partner and I so 211 each.

    Yearly ROI is 3381%

    Monthly interest on 21k note is 192.50 which is 11% on the money.

    Total profit on sale after 5 years including monthly cash flow payments is about 54,608 split between the 2 of us so $27,304 each.  Additional profit for second performing note $12,600 (this includes a 1% bonus per year at the end of the 5 years so it is actually a 12% note).

    So even though the appraisal came in low, we were able to get almost all of our money out with one of my businesses buying the 2nd performing note and everyone in the situation is happy.

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  • Amy A.
    Portland, ME · Member since 2012 · 616 posts · 550 votes
    9y

    @David Faulkner you are absolutely correct that they should not care how you acquired the property and its value should only be based on comps.  However, I have had several appraisers and underwriters over the last few years ask for a list of improvements in order to justify the increase in value over what I paid for it.  I've even had appraisers tell me that they value "flips" lower because they are often done shoddily.  I even had one appraiser tell me that she had wanted to buy this property but missed the auction.  She proceeded to use terrible comps from other towns and give a ridiculously low value.  The bank took her appraisal as gospel and we had to start over with another lender and new appraisal.

    Appraisers are human and humans get jealous.  Now, if I get the chance, I tell the appraiser about how disgusting the house was and how terrible it was to work on, how we went above budget, it took longer than expected, etc. just to get them to feel sorry for me and not be jealous.  NO bragging about the $50k profit!

    0Reply
  • Eric Anderson
    Visalia, CA · Member since 2015 · 97 posts · 44 votes
    9y

    @Tyler Haskell

    The herd drives the value on residential properties.  The property will go up in value as long as there are enough people willing to pay the increasing prices.  

    Commercial real estate uses the property's performance to determine its value, which sounds like the way you'd like to see things go.  If so, commercial real estate may be for you

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Jacob Murphy:

    @Tyler Haskell

    Great insight here to the struggles of BRRRR investing. I do feel the same way, you are at the mercy of the banks at the end of the day. My first BRRRR killed me because the appraiser didn't consider 1 of the 3 bedrooms to be legal since it was too small. That put me with the 2 bedroom comps of the area which were pathetic! I had to leave 20K of my own money in the property. Totally knocked the wind out of my sails.

    The only solution I have come to is to work with a small local bank that only uses 1 appraisal company. I then have that appraisal company come out before I do any rehab, tell them exactly what I plan on doing, check what they recommend for the highest ARV. From there we have an understanding of what I want to do and what types of comps I will be compared to. When it comes time to do the cash out refinance, I specifically ask for the appraisal agent that consulted me before doing the rehab. I bring him/her out before the tenant moves in (just in case they want something else done for best appraisal) and hope that they appraise close to what we agreed to before the rehab.

     HI Jacob,

    Tackling the BRRR strategy via the appraisal company and use of 1 appraisal company is one way to reduce your risk. The are other ways to have a more predicatable guestimate on the appraisal value, because as "we," on this thread know is that appraisal value is not market value its only one appraisers opinion of value and its often not a very good one.

    I always recommend investor clients review the comps by way of looking at what guidelines the appraisers have to use. This is often the hardest part for a BRRR investor because little do they know like in lending there are guidelines, in appraising there are guidelines as to which comp, distance, time of sale, adjustment increments (percentage) , property type, etc that an appraiser can use.

    These guidelines can drastically affect value as one other commentator above your comment mentioned, her 3bd SFR got comped with 2bd comps because of legal consideration of the 3rd bedroom was thrown out.

    If I were to impart any advice to my borrowers, I would review the appraisal guidelines for each type of lending product (yes different products have different appraisal guidelines too! jumbo, FHA, conventional, VA, portfolio, etc).

    If you're in a small town using a local bank with only a couple local appraisers, this may be a way of reducing appraisal risk. For those of us in larger markets we never know who we're going to get assigned to our appraisals so this strategy does not work as well. I would always advocate knowing the guidelines the appraiser will be using to help reduce that value risk. Your lender, if experienced, should be familiar with these criteria that the appraiser must meet for their report to past desk review (an appraisal review process by the lender).

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Amy A.:

    @David Faulkner you are absolutely correct that they should not care how you acquired the property and its value should only be based on comps.  However, I have had several appraisers and underwriters over the last few years ask for a list of improvements in order to justify the increase in value over what I paid for it.  I've even had appraisers tell me that they value "flips" lower because they are often done shoddily.  I even had one appraiser tell me that she had wanted to buy this property but missed the auction.  She proceeded to use terrible comps from other towns and give a ridiculously low value.  The bank took her appraisal as gospel and we had to start over with another lender and new appraisal.

    Appraisers are human and humans get jealous.  Now, if I get the chance, I tell the appraiser about how disgusting the house was and how terrible it was to work on, how we went above budget, it took longer than expected, etc. just to get them to feel sorry for me and not be jealous.  NO bragging about the $50k profit!

    Ha I like that reverse psychology Amy, lets call it the pity play with appraisers. I can relate with this because I've seen your examples above as well.

    I was doing my own BRRR and the appraiser told me darn he wished he would have bought the same property and that he will do "his best," in determining the comps. Long behold he came in way lower (of course right?) and I had to refute the appraisal with higher pending and sold comps in the area. He invariably, took all of the lowest comps, but ultimately in the end I was able to come up 25k (at 70% LTV this saved me 17,500) in value so it helped but I was stuck in my deal still with about 30k of rehab capital still.

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Robb Almy:

    I'm a little bit confused about any bank using one appraisal company/ contractor.  Is this because you are getting a portfolio loan?  If not a portfolio loan, I thought any conforming/ conventional loans had to be handled through an appraisal management company (third party) that randomly selects the appraiser from a pool of appraisers.  Can someone explain.  Thanks!

    Hi Robb,

    Lenders are not required to use AMC's (Appraisal management company's) but a lot of them do because it creates a "firewall," between the borrower, loan officer, and other parties that might cause liability risk to the lender.

    Some lenders have their own vetted panels of appraisers (bank or lending company vet's them out prior to assigning the appraisal assignments to them). These companies take the risk in house but as a result usually get better results because AMC's typically take 30-50% of the appraisal fee's that appraiser's make so appraisers have to work a lot harder when working for AMC's than for in house bank/lender panels where they typically get to keep it all minus a flat low fee.

    This reflects in the quality of appraisal reports a borrower can get because the appraiser can field more questions and can spend more time per report than having to machine gun through appraisal assignments so that he/she can pay their mortgage and car payments.

    At my company I work with we have a local panel in select markets like orange county/ Los angeles and in large metros like seattle, but for the rest of the country where we lend we use a AMC.

    Hope that helps explain the dynamics of appraisal from a lender/appraiser perspective.

    1Reply
  • JAson Stern
    Washington, DC · Member since 2015 · 1 post · 0 votes
    9y

    My suggestion is that you make friends with a real estate appraiser.  Ask them to get on the approved list with the bank you are using for refinance.  Once they put the appraisal out for bid, ask your connection how much they bid.

    0Reply
  • Mike D.
    Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes
    9y

    This is a really good point. I believe it pays to set up the property as if you were showing it to a potential buyer instead of an appraiser. Meet them, be very nice to them, and mention all the things you've fixed and all the property's wonderful features. I've found appraisers can be ridiculously wrong, especially if they don't know the area and compare your property to the wrong comps. If all else fails, begging may help. I'm serious. A few years back I had to jump through all kinds of hoops to get a property to pass an FHA appraisal. To show that a furnace worked, I literally sent the appraiser a picture of a piece of paper blowing in the wind from the furnace, and he agreed to let it pass instead of charging for a second appraisal, basically because I begged. Never underestimate the powers of friendliness, insistence, and begging.

    0Reply
  • Ryan MurdockPro Member
    Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    Be reasonable, but don't be afraid to tactfully tell the appraiser the number you are hoping to get. It's amazing how many people don't do this and then complain about value. Tell them what you need and provide comps to justify.

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