Appraisal Issues with Refi

[Gregory Doyle]

I am house hacking a duplex that I purchased last year significantly below market due to it being poorly managed, and have since made some minor improvements that allows me to raise the rent to market value.

I recently attempted to do a cash-out refi expecting to benefit from the much-improved income, but the appraisal did not go as expected.

Because the building is 2 units and technically residential, the appraisal came back at $520k using the market value evaluation. The income approach model valued the the property at $700k, but my lender was not able to use the value based on the income approach because of the property type.

I may be grasping at straws, but is there a way to refinance/pull cash out of a duplex based on it’s income value instead of the market value?

[Stephanie P.]

Originally posted by @Gregory Doyle:

I am house hacking a duplex that I purchased last year significantly below market due to it being poorly managed, and have since made some minor improvements that allows me to raise the rent to market value.

I recently attempted to do a cash-out refi expecting to benefit from the much-improved income, but the appraisal did not go as expected.

Because the building is 2 units and technically residential, the appraisal came back at $520k using the market value evaluation. The income approach model valued the the property at $700k, but my lender was not able to use the value based on the income approach because of the property type.

I may be grasping at straws, but is there a way to refinance/pull cash out of a duplex based on it’s income value instead of the market value?

No unfortunately.  Income approach is only to support the sales approach on residential properties and is only used for value on commercial properties.