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Creative Real Estate Financing

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Julie Croegaert
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Preparing for an appraisal / rental survey of a short term rental

Julie Croegaert
Posted May 12 2022, 15:37

I am in the process of purchasing a vacation/lake house (ie short term rental) with a self directed IRA and non-recourse loan. I'm preparing for the appraisal, which is based on the property's ability to cash flow, as opposed to its overall value/purchase price. If anyone has experience with how to prepare a report for an appraiser, I am looking for advice. While I can look at AirBnB price per night and view their calendars for bookings, I'm not sure if this data is enough to create a solid report to provide the appraiser. Thanks in advance for any help on this!

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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
Replied May 12 2022, 16:31

@Julie Croegaert, typically for 1-4 unit properties the value is primarily based on the comparable sales approach not the income approach. Did you specifically discuss this with the lender and get an agreement from them to use the income approach to determine value?

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Rhonda Cohen
  • Realtor
  • Northampton, MA
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Rhonda Cohen
  • Realtor
  • Northampton, MA
Replied May 12 2022, 20:42

I did a thorough analysis for a dscr loan officer. I reviewed 4 -6 airbnbs and used nightly rates (that varied by month) and calculated monthly rental income based on occupancy rates.  I reviewed properties on vrbo and airbnb to identify comps. I made a chart that compared the properties and their revenue. It took some time but since I had already done a version of this to find a property for which the numbers worked, it was relatively easy to formalize the numbers for the loan officer.  In my report, I included info that I learned from calling local property management companies to get revenue projections. Though my goal was short term rentals I also confirmed the rental rates for long term. I used real data and was conservative in my estimates to ensure it was a profitable investment.   Hope this helps.  

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Julie Croegaert
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Julie Croegaert
Replied May 13 2022, 05:42

Rhonda, this is helpful and I partially did this for the loan officer, which satisfied his need to grant the loan pre-approval.  Now I need data to provide the appraiser.  I've pulled together the nightly rental rate for 4-6 STRs nearby.  I'm guessing the local property management companies can confirm occupancy rates because that data isn't available otherwise, right?  

Kevin, I've confirmed and it's a result of this property being used as a short term rental.  

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Replied May 15 2022, 13:03

There is a website called Airdna that has overall information for an area for free.  If you pay the annual fee, you can get very detailed information that should meet the needs of everyone including yourself that you can get the income you are after.