Tips & Tricks for Higher BRRRR Appraisal?
Hi All,
As I enter the rehab phase of my latest BRRRR (Pittsburgh PA), I'm always wondering what we can do to add value to the appraisal when it comes time to refinance in a few months. I am looking for any tips or tricks that could help fetch a solid appraisal value without going overboard on a mid-tier rental/location. Keeping in mind that BR/BA count, square footage and neighborhood are all going to be main appraisal factors (none of which are easy to change), are there any other "minor" improvements that you make for your BRRRR properties? Any that increase rental potential but not appraisal value, or ones that increase appraisal value but maybe not rental potential? I will name just a few that we are considering for the current project...
- Central Air Conditioning: This one feels like a no-brainer, since there is existing ductwork and the place won't be ready until spring/summer, when tenants are in search of rentals with A/C around here. It also would increase the appraisal value without a doubt, right?
- Off-Street Parking Pad: I'm a bit less sold on this one, because the parking pad would have to be in the back yard, with no clear path to enter the house. Parking isn't easy on the street, but if there was a parking pad in the current setup, a tenant would have to walk up the back yard and enter the back/basement door or even walk around to the front door. When the alternative is parking/walking from a few doors down, I'm not sure a renter would pay extra for the pad. However, is that something that an appraiser would look at and immediately add value for, even if it's not an ideal setup? Torn on that idea but leaning towards "no" on this instance.
- Stainless Steel Appliances: I've gotten various opinions on this one, both from online articles and local realtors. Renters and buyers seem to want stainless steel appliances to the point that they'd prefer used stainless over brand new white/black... So my question is, do stainless steel appliances add to the appraised value? For this rehab, there is a newer white (gas) stove and range hood, but old/outdated dishwasher and refrigerator -- so those two need replaced regardless. My question is, should I shell out the extra money for all-new stainless steel appliances, or just clean off the white stove/hood, and save $600-800 by only buying a new white fridge + dishwasher? The entire kitchen (cabinets, sink, counters, etc.) will be brand new, if that makes a difference. My gut says stainless will appeal to renters, but I'm unsure about how it might impact the appraisal.
Any ideas or opinions are welcome and appreciated!
@Robert Kohnfelder So technically an appraiser doesn't include appliances - although generally a place looking nicer might just help there opinion of the place in general.
I can't answer all your questions since I usually only do small stuff to help with the appraisals: replacing all the light fixtures and door knobs so things look new, new cabinet hardware. Clean up the property, obviously, some light landscaping. I figured the bigger ticket items are less likely to be worth it - but maybe someone else can jump in here and tell you that. On my last refinance the appraiser adjusted the value of a comp by just -$1000 because it had central A/C while my property did not - although there's a huge value to the renter as well, ask your property manager.
For the appliances, are you factoring in that if you went with stainless you could sell the old white appliances? That might make it worth it, used appliances are getting a good price right now.
My biggest thing for getting a good appraisal is providing a detailed list of all the work I put into the property. A few times I've provided comps, but you do have to be careful because that can seem like you are telling them what to do.
@Stefan D. thanks for the input! Yes I'm leaning towards shelling out the extra money for stainless steel appliances because this property is going to have a fully renovated kitchen -- now would be the time to upgrade. And between the choice of A/C vs. Parking Pad is tough, but I'm leaning towards A/C due to the cost and appeal it would have to a renter. Worried about spending too much for a parking pad that might not get used, and due to it having to be in the back of the house anyway, I'm not sure I could recoup my money on the cash-out refi.
@Robert Kohnfelder, I can't technically speak from an appraisers point of view, but you are going to limit your buyer and renter pool by not having central air and off street parking. I don't see either of these adding to your value in any meaningful way, but they will both add to a faster sale/lease, and are items both buyers and renters will almost always be actively seeking.
Now if you already have a driveway to park in, then I don't think you need a pad, but it sounds like you have no parking on property at all, and on street is a detraction in many areas. (Side note: I did not have trouble leasing a duplex, which one unit only had on street, but this was a residential street where every other house on the street had driveway access, so there was always plenty of open parking).
As for stainless steel, I would argue design trends are moving away from traditional stainless. I was in a property last week that is not being upgraded to stainless. The black appliances fit the black and white design better, and tenants look at overall design, not appliances specifically. Even high end homes rarely have stainless steel, they either have panel faced, built in look, or are going to the white or black stainless style. But if you have a new kitchen, again, aging appliances will feel extra dirty, so worth the upgrade both for tenant's benefit and yours in few maintenance calls.
@Evan Polaski all good points -- I appreciate the insight. While a driveway/off-street pad would be ideal, on-street parking in/around the city of Pittsburgh is fairly common, so it shouldn't limit the tenant pool too badly. I have a few other units, none of which have off-street parking, and they do just fine in terms of renting.
Also, I agree about the appliances. I think a new, bright white kitchen will look just fine with clean, newer white appliances... however, my worry is from an appraisal standpoint. Something as simple as an appraiser comparing the home to a similar one that recently sold with stainless steel appliances. Maybe I'm overthinking it, but most realtors in my circle said the safest bet is shelling out for stainless, whether I would do it for my own home or not...