Apprasing MF in downtown Americana

4 Replies

 Happy weekend BP !!

Should I bring in any professional appraiser as part of my due diligence? Or should I shoot for someone near the target sub market?

I plan on purchasing mf in the downtowns of the cities surrounding Houston, mainly those with a more “Americana” type of feel( white picket fences, 4th of July block parties, neighbors worship together, founding families are still around and they let you know it, high walkability score, families are out on the street with neighbors, doors are unlocked.....)

It is tough to comp certain property because they might be the only type (or one of the only two) AND some of these towns do not allow any more MF to go up, so the MF owners set the market. I’m racking my mind, how do I value these properties?!

My concern is someone familiar with the territory might just give me a guesstimate based on when the property last traded Plus or minus any appreciation. Someone who rarely sees areas and scenarios like this might not give me the “right” number, whatever that means.

If you can, I’d love any input!

Happy weekend!

ultimately it's going to come down to NOI and a cap rate for valuation but assuming you are going to use bank financing, they will want to see an appraisal. I could probably help you out a little more if I knew what your plan was. Buy/hold as an existing income seeker or will you be looking more for value play that you can renovate then either hold or flip out of?

Originally posted by @Bill Spell :

ultimately it's going to come down to NOI and a cap rate for valuation but assuming you are going to use bank financing, they will want to see an appraisal. I could probably help you out a little more if I knew what your plan was. Buy/hold as an existing income seeker or will you be looking more for value play that you can renovate then either hold or flip out of?

It is definitely not stabilized and it might take 18-24 months to get there. And definitely hold. I see opportunity for a healthy NOI increase within the same time frame. It will just be very intense

Appraiser might have to get creative with the comps.  The very first deal we did in the Heights we had the owner carry back the construction note then when we refied him out, we had to use a much larger property and a condo deal for comps.  After that one was done, it became a comp for our second, third etc.  You will want to look into smaller regional banks for financing and as long as your proforma caps aren't ridiculous and you can show a cap rate reduction from going in to coming out or refi, you should be fine.  Might have to knock on a lot of doors though.  We had luck with Prosperity Bank, Green Bank and Mint Bank.

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