Buy and Hold Appraisal

7 Replies

Hello BP!

For all of my cash buyers that buy and hold for cash flow this question is for you.

Do you bother to get an appraisal if the purchase price meets your cash flow requirements? 

If you are buying residential properties, it would be foolish not to get an appraisal on the house you are
In my view, it is important so that you get an idea of what you are paying.
Do you want to buy a house for 200k that is only worth 100k even if it is cashflowing.
Maybe yes, in which case, you just have to know that you won't be able to sell it down the line if you decide.
In other words, do you want to be in negative equity at the point of purchase of a house?

The only time I ever get an appraisal on a property is when the lender requires it. When you do your research of the area in the market, you’re running comps and will have a very good idea of what the house is worth. Not even my private lenders require an appraisal, because they can look at the comps themselves. You’re not going to be $100,000 off the value, that’s just silly.

I feel the same way about inspections. My contractor walking through the property with me as my inspection. I approach it the same way whether I’m buying a house to flip it or to keep it as a rental.

@Kristen Ray I buy for cash and don't get an appraisal, but I know within +/- 5% what the property I purchase is worth.

I have a very specific market and I know what the homes in that area have sold for, whether they be foreclosures, short sales, MLS sales, or new construction. I've never bought a house for above what a comp sold for on the open market.

It just so happens that to meet my criteria a home has to be below market value for the rental rate in the area, but I don't rely on that as a filter. 

The Comp Sale method and REI in general have enough variables in them already for the average investor; adding in the wrinkle of buying above market value is not something I'd do in general. Possible in a one off scenario, but as a rule of thumb you want to buy your assets below their value, not above.

I do not when I am buying cash. Typically to meet my criteria my all in costs (purchase + repairs) have to be no more than 75% of what I have calculated to be the ARV based on comps I pulled.

thanks for your input 

@Bill F. I recently wholesaled a turnkey property and the buyer (cash buyer)  did an appraisal. Even though it was turn key it was below market. I was just wondering what other investors thought. 

Originally posted by @Patrice Penda:

If you are buying residential properties, it would be foolish not to get an appraisal on the house you are
In my view, it is important so that you get an idea of what you are paying.
Do you want to buy a house for 200k that is only worth 100k even if it is cashflowing.
Maybe yes, in which case, you just have to know that you won't be able to sell it down the line if you decide.
In other words, do you want to be in negative equity at the point of purchase of a house?

Just to clarify here.
I meant it be foolish not to get an appraisal done for the house you are buying or having comps run by someone who knows how to do it properly. I certainly would not go with the comps that the wholesaler or seller provides.

Originally posted by @Kristen Ray :

Hello BP!

For all of my cash buyers that buy and hold for cash flow this question is for you.

Do you bother to get an appraisal if the purchase price meets your cash flow requirements? 

 Most folks who are buying with cash don't typically get an appraisal. I've seen a few do it over the years but they are definitely the minority.

Note to newbies out there. I DO NOT recommend being a cash only buyer on your 1st couple properties. Go ahead & use that bank financing & get that built in protection of a bank appraisal. Use the banks money before your own. Bank isn't gonna let you loose their money.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

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