My First B-R-R-R-R Fail

150 Replies

Originally posted by @Brian Ellis :
Originally posted by @Merritt S.:

Sigh. Appraisals. I've been a mortgage appraiser for 14 years, only to recently stop doing them. Why? Well, I'm a little too good at math and a little too honest to be a mortgage appraiser. I only regret it took me 14 years to get so good at doing them to understand I needed to stop doing them. There is much, much more to that story, which I attempted to convey here, but after 5 pages in a word doc realized I needed to shorten it up and it probably wouldn't fit in the space allowed anyways. There are three significant problems. #1 FNMA. #2 The lobbying of special interests (FNMA). #3 The failure of appraisers to speak and act collectively. It's a poo-show and I want no part of it anymore.

But hey, no worries. Soon a computer will replace appraisers. I am going to laugh hard when people try to contest their AVM. Heck, people might even look back and miss appraisers when that happens.

There is no such thing as a good or bad appraisal. Only weak or strong. Anyone ever stop to consider that maybe that "bad" and "low" appraisal might be something to consider as a word of caution rather than an obstacle or problem to be remedied? All you people who say contesting the appraisal is the answer can jump off a short pier into a deep lake as far as I'm concerned. Where was your due diligence? Why do you expect your problem to now be the appraisers problem? I think the motivations are clear. You want a loan no matter the risk because, it aint your money now is it?

...Or, is it? Last I checked, FNMA was owned by the taxpayer. Last I checked, banks can rely on taxpayer bailouts. Hmm...seems maybe the only people at risk here is everyone, nothing short of the global economy. But, if we get all philosophical about it and do some mental acrobatics, what is money anyways right? Whatever it takes to sleep at night on a bed made of money I guess. Forget about all the peasants sleeping in tents.

Again, I could write a short novel on the subject (getting close here). Instead, I'll offer some quick advice. If you are going to use a lenders money, you should look at a property the same way the lender is going to look at a property. That means no comps, no value. Doesn't matter if it's right or wrong. All that matters is what can be supported with facts (closed sale prices). Don't look at two sales and expect the appraiser to come to the same conclusion you did six months later.

Loans for properties where the value concluded by the appraiser is supported only by the income approach to value (a contradiction to what the other appraiser on here said) are ineligible for sale to FNMA. The value must be supported by the direct sales comparison approach, which means the closed sale prices of similar property. If a lender orders an appraisal on a FNMA form (which they all do), that indicates they are reserving the option to sell it to FNMA, no matter what they say they are going to do or actually do. Therefore, the default is always FNMA.

Finally, the time to attempt to influence the appraiser is during the development of the appraisal and before the appraiser turns in their final product. When you "contest" or ask an appraiser to "reconsider" their opinion, you are basically claiming their incompetence, not to mention wasting their time 99.999% of the time. If you have market evidence of a certain value, go ahead and present it to the appraiser at inspection. And when you do that, slip in what you expect the appraisal to come in at. LOL. Why do I say that? Because no property is worth an exact amount, though all mortgage appraisals are defined as an exact amount. That means the appraiser has wiggle room and if it's here nor there either way, they might probably just go your way. I suppose you could run into the occasional curmudgeon who might get riled up and then that would backfire, but I promise those guys are the minority. Low-balling is just as bad as high-balling, and appraisers know that. The most probable price means just that, and has no relation to the high-end, low-end or middle.

PS - Off-market sales are really the only ones that are going to have a chance with the appraiser after the fact. You have to provide something the appraiser has not already looked at. Yet again, why wait until after? If you have off-market sales ABSOLUTELY present them to the appraiser at inspection. Off market sales take extra time to verify, and maybe they cannot be verified, and all sales must be verified if used in the appraisal. But also think about this, how motivated is an appraiser going to be if your actions are wasting their time/money? It is certainly possible an appraiser will poo-poo your off-market sales after the fact simply because of that. Remember this, appraisers are insanely underpaid. Well, the good ones anyways. 

I have met each appraiser at inspection. I show them what has been done and take the opportunity to show off the property. I make sure the property is clean and free of obvious needed repairs. If I have a tricky market, I offer them sales data I found and plea my case. I do not pressure them. Only the mice will get offended by this. Smart appraisers consider all relevant information, without bias to the source. That said, appraisers must always verify information provided by others, especially those with bias to the outcome!

Stop beating up your appraisers folks. They are trying to help you make the right decision. Do your own due diligence beforehand and stop expecting the appraiser to pick up the pieces of your failure. It's not their fault the data you need does not exist.

To the OP, bravo for posting. That takes some guts. I too made an interesting "mistake" lately and have been considering posting it. Wish I had an answer for you other than simply selling the property and moving on to the next one. It's at least worth what you got into it right? Live and learn. Best to laugh to keep from crying sometimes.

LOL. Yea, I'm a bit bitter when it comes to the appraisal industry. I'll own that.

Im sure appraisers get beat up pretty good. The guy seemed very black and white, no grey areas. I respect that. I could have tried to talk it up and get him to mark it up as much as possible, but at the end of the day I want an honest appraisal. If my rental will only sell for 255k, I need to know that.

 I can tell you are a good guy and I think that's a good thing! The world needs more.

Worry not about any influence you think you might be imposing on the appraiser my friend. It's their job to remain impartial. If I had $1000 for every time someone tried to influence me I could retire.

While anyone else can form an opinion about the value of a property using any means they care to, an appraiser must form their opinion based on facts (this means sales data for lending purposes). The lesson here is that there were not enough facts (sales data) surrounding your property (typical of multi-family). Who knows if the appraiser was "right" or "wrong". They likely did the best they could with what they had. The accuracy of the opinion can only be measured when the property is sold.

Something I want to point out is that mortgage appraisals are designed by the bank, for the use of the bank. They are not designed to be used by the buyer, or seller, or agent. And, the borrower may rely on them only in the context of the loan. That generally means 80% and in your case, 70%. You likely paid for the appraisal, but it is in no way your appraisal. The only reason you even received a copy of it is because of the practice of banks asking loan applicants to pay for them. That made someone cry foul, and now there is a law saying an applicant that pays for an appraisal is entitled to a copy of it. However, possession does not equal right of use and sometimes good intentions have unintended adverse consequences. I'll get to that in a minute.

Real estate is never really worth an exact amount, however all mortgage appraisals are defined as an exact amount. This works just fine for the bank, which requires a borrower put up 20% and if not, the borrower must pay for mortgage insurance to cover the top 20%. Never forget that. Seriously think that one over. The fact the bank requires mortgage insurance, a policy paid for by the borrower, with the bank named as the beneficiary, when more than 80% is lent provides insight to how much credibility, or shall we call it the margin of error, an appraisal of property has. Banks are not dumb. The bank knows exactly what the appraisal is, and more importantly, what it is not.

Buyers, borrowers, sellers and agents however, tend to be quite ignorant when it comes to appraisals. Cheap too. I've always found it amazing that during the most expensive transaction in a persons lifetime, they all of a sudden get cheap when it comes to due diligence. But in fairness, most people just don't know what they don't know and take bad advice from parties who do not have their best interests in mind. What I mean by that is, everyone in the transaction, the seller, two agents and the loan broker, don't want you to get your own appraisal and would prefer you rely on the bank appraisal. Why? They don't want you to have all the facts and think things over, they want you to sign and close the deal.

What a mortgage appraisal does not provide is the probable range of value. Mortgage appraisals are all defined as the most probable price. Thus, the buyer (and/or borrower) has no way of knowing if they are getting a good deal or not, only that their offering price falls somewhere within the probable range. (The same applies to a refinance too.)

Here's an example. The market value, defined as a probable range of value, is $100k to $125k. We have all observed these margins right? Sometimes more. But now we have 3 appraisers all tasked with defining the market value as the most probable price. Appraiser A opines $100k. Appraiser B opines $115k. Appraiser C opines $125k. Who is right? The answer is they all are. The only appraiser that could be proven "wrong", would be an appraiser who came in either under $100k or over $125k. If you get 10 appraisers in a room and ask for an opinion defined as the most probable price, you will likely get 10 different answers. But if you ask the same group to opine the probable range, they will likely all be the same.

Real estate is always best defined as a range of value.

Now, here in WI and I believe in other places too, standard purchase agreements call for and allow the appraisal contingency to be satisfied using the mortgage appraisal obtained during the financing contingency. This is so wrong on a couple of levels. First of all, the mortgage appraisal is not designed or intended to be used for that purpose. Second, the buyer and seller do not have the permission of the appraiser, or bank, to use the appraisal for that purpose. In fact, if you ever bothered to read the appraisal, it specifically prohibits the appraisal be used for any other use. Last, and what many people do not know, is that appraisers are required to "analyze" the purchase contract during the development of the appraisal (another can of appraisal worms entirely). That means the appraiser knows exactly what the offer is. Sure, appraisers are charged with remaining unbiased. But have we simply forgotten human nature? Sort of like asking someone to jump in the lake, but somehow not get wet. Not exactly what an appraisal contingency is designed to accomplish is it? Appraisal contingencies are designed, in part, as a negotiation tool. The buyer and seller are expecting a degree of accuracy that simply does not exist.

While nobody ever does this, the appropriate way to do an appraisal contingency is for the buyer, seller and appraiser to all get together and agree upon how the appraisal will be developed and to establish the expectations of accuracy.

Consider these scenarios:

Pre-Listing Appraisal - Best defined as a range, small amount of expectation of accuracy to the dollar, the range is the most meaningful to the user.

Pre-Offer Appraisal - Best defined as a range, small amount of expectation of accuracy down to the dollar, the range is the most meaningful to the user.

Sales Contract Contingency Appraisal - Needs to be defined as a single dollar amount, high-expectation of accuracy down to the dollar, the single dollar amount is the most meaningful to the user.

Mortgage Appraisal - Does not need to be, but per custom is defined as a single dollar amount, small amount of expectation of accuracy down to the dollar, the single dollar amount is most meaningful to the user.

So consider both the different expectations and risks of the different parties in the different scenarios. The bank has an insurance policy for the top 20%. What insurance does the buyer have to protect their 20% down-payment and also the liability of the loan amount? Zilch.

Due diligence is required for anyone who wants to get a good deal. Understanding what an appraisal is, but more importantly what is not, is part of that.

I hope I did not bore you to tears and sorry for hijacking your thread a bit here. I suppose I just hear the wrong ideas about appraisals so often, and watch the carnage afterwards, and then get personally blamed all too often, that I thought I would take the time and write this out. 

Peace!

@Brian Ellis

Thanks for sharing your story.

Your in a unique situation based on the ARV of the property but on the bright side you have cashflow and equity.

Here are options that you can consider for future projects.

Whether you have a fannie mae loan or not picking the right refi cashout loan with the right terms is essential to getting the BRRR strategy to work after all other factors of the buy price ,rehab costs, and appraisal comes back strong.

I know you mentioned not wanting the higher rate but depending on how long you had the property You have 3 options that you may want to consider

80% LTV cashout with an alternative lender 30yrs fixed at 6.5 % (property needs to be owned for a year and the lender will pay for the appraisal)

Or cashout now at 75% LTV 30yr fixed at 6.5% without seasoning get some equity out and start another project.

Last option is to do the cashout either at (75% or 80%) pay off the first mortgage

Once its paid off on your credit report go to a local bank to open a line of credit to use as a safety fund gap or liquid source of capital for your next deals.

This last option is a little creative but can repelnish your investing reserves quicker to act on better deals to get the new deal to pay off this deal.

In this investing business its not about right and wrong its about how much you make when you right and how much you lose when your wrong.

If you need help with this, feel free to reach out

Originally posted by @Brian Ellis :
Originally posted by @Keith Radke:

@Brian Ellis. I am an appraiser and Realtor in Illinois and work with investors. There are 3 approaches to value that an appraiser MUST consider on every appraisal. They are: sales comparison approach, cost approach and income approach. Look at your appraisal and see if the appraiser considered anything but the sales comparison. He probably did the cost approach, but usually they avoid the income approach. Most appraisers won’t rely on income or cost when their comparables suck, but I would. The problem is that the underwriters freak out when appraisers actually do their job and value anything other than sold comps. Someone else made a good point about the purchase price and the low rehab amount. We appraisers get called to the carpet frequently when we value something much higher than a recent sale. You may want to connect with an appraiser that is proficient in appraising income producing property and get one done ahead of time.

 Cost approach was around 256k. Income approach had it a little above 290k. Comps sale price: 309k 325k and then the one that hurt me 239k.

The shape of those properties id say is comparable to mine, maybe a little worst. I consider it a C class neighborhood 

 Uhm...I know I just went on and on about how contesting appraisals after the fact is a DB move, but at a glance here the market support provided by the appraiser does not appear to support the opinion. Are the sales over $300 so superior to yours? Are they even relevant then? Is that low-baller really the most relevant sale? If the opinion is going to be closer to $250k, where is the second sale supporting that? I'd be willing to bet you have an appraisal on your hands that is supported using adjustments, meaning they adjusted down the high ones. The problem with that is, adjustments are always subjective and generally not supportable. (I might have opened up a can of worms for myself there by saying that if any other appraisers are reading this - lol.) You might be able to get a second appraisal based on the simple fact the first opinion is not adequately supported. The general rule of thumb is that at least two of the three point to the conclusion. Low-balling is just as bad as high-balling. The monkey in the works here is the prior sale of the subject (your purchase). Why did you pay what you did? Do you believe you got a discounted price? Appraisers always must report and reconcile prior sales of a subject property because, they often are good indicators of current value. But if you can somehow prove you got it at a discount, you may have a better shot.

Look, most appraisers are good at what they do. But the truth is all professions have their duds. Maybe you did get a dud.

Lenders are by law not allowed to shop appraisals (anymore - lol). That means the lender needs to prove the appraisal is deficient before they can order and use a different one. That's not exactly easy to do when we are talking about an opinion. However, you might have some ammo in this case. You (the appraiser rather) simply only have one comp. Also, there is nothing stopping you from going to a different lender and starting over with a different appraiser if you end up feeling like the comps are out there and the appraiser simply didn't see it the way they ought to have.

LOL. Sorry. I probably should have read the thread more closely...I tend to ignore the parts where people start talking about the specifics of their valuations cause to me it's just another property with comps and value and everyone always seems to think they got screwed when they usually are just bitter it didn't work out like they wanted. Ok. I'm leaving now.

Originally posted by @Merritt S. :
Originally posted by @Brian Ellis:
Originally posted by @Keith Radke:

@Brian Ellis. I am an appraiser and Realtor in Illinois and work with investors. There are 3 approaches to value that an appraiser MUST consider on every appraisal. They are: sales comparison approach, cost approach and income approach. Look at your appraisal and see if the appraiser considered anything but the sales comparison. He probably did the cost approach, but usually they avoid the income approach. Most appraisers won’t rely on income or cost when their comparables suck, but I would. The problem is that the underwriters freak out when appraisers actually do their job and value anything other than sold comps. Someone else made a good point about the purchase price and the low rehab amount. We appraisers get called to the carpet frequently when we value something much higher than a recent sale. You may want to connect with an appraiser that is proficient in appraising income producing property and get one done ahead of time.

 Cost approach was around 256k. Income approach had it a little above 290k. Comps sale price: 309k 325k and then the one that hurt me 239k.

The shape of those properties id say is comparable to mine, maybe a little worst. I consider it a C class neighborhood 

 Uhm...I know I just went on and on about how contesting appraisals after the fact is a DB move, but at a glance here the market support provided by the appraiser does not appear to support the opinion. Are the sales over $300 so superior to yours? Are they even relevant then? Is that low-baller really the most relevant sale? If the opinion is going to be closer to $250k, where is the second sale supporting that? I'd be willing to bet you have an appraisal on your hands that is supported using adjustments, meaning they adjusted down the high ones. The problem with that is, adjustments are always subjective and generally not supportable. (I might have opened up a can of worms for myself there by saying that if any other appraisers are reading this - lol.) You might be able to get a second appraisal based on the simple fact the first opinion is not adequately supported. The general rule of thumb is that at least two of the three point to the conclusion. Low-balling is just as bad as high-balling. The monkey in the works here is the prior sale of the subject (your purchase). Why did you pay what you did? Do you believe you got a discounted price? Appraisers always must report and reconcile prior sales of a subject property because, they often are good indicators of current value. But if you can somehow prove you got it at a discount, you may have a better shot.

Look, most appraisers are good at what they do. But the truth is all professions have their duds. Maybe you did get a dud.

Lenders are by law not allowed to shop appraisals (anymore - lol). That means the lender needs to prove the appraisal is deficient before they can order and use a different one. That's not exactly easy to do when we are talking about an opinion. However, you might have some ammo in this case. You (the appraiser rather) simply only have one comp. Also, there is nothing stopping you from going to a different lender and starting over with a different appraiser if you end up feeling like the comps are out there and the appraiser simply didn't see it the way they ought to have.

LOL. Sorry. I probably should have read the thread more closely...I tend to ignore the parts where people start talking about the specifics of their valuations cause to me it's just another property with comps and value and everyone always seems to think they got screwed when they usually are just bitter it didn't work out like they wanted. Ok. I'm leaving now.

This thread was meant for education, so I appreciate the feedback! My rental is a 2/2, all comps were 3/2 4/2 and 4/2, so the adjustments were made on all three. The 3/2 was the one that was most comparable and closest to mine. But it was not a duplex, it had a separate cottage on the same lot. 

Lendingone.com is pretty easy and I think gives 80% (at high interest rate though)

 You can also simply refinance at 70% and get and extra 10% with unsecured loans (Wellsfargo does them ) and go buy your new property... if current property cash flows you can afford higher interest payments 

@Brian Ellis

"I’ve talked to about 15 lenders and banks, it’s fannie Mae guidelines. I can do a non-agency backed loan at 80% I believe with a rate 1% higher"  

if the rate is only 1% higher just do it, just factor that 1% into your next deal and buy it better.  Get your money back out and get that next property. 

I'm an appraiser with 14 years experience and 7,000 appraisals under by belt.  Ask away if anybody has any questions regarding investing or appraisals and I'll do my best to respond 

@Brian Ellis thanks for sharing. It’s not always huge wins. Going through something similar but can’t find tenants to rent. Really appreciate you highlighting some of the struggles. Keep going though and see if you can partner on another deal.

Originally posted by @Brian Ellis :
Originally posted by @Merritt S.:
Originally posted by @Brian Ellis:
Originally posted by @Keith Radke:

@Brian Ellis. I am an appraiser and Realtor in Illinois and work with investors. There are 3 approaches to value that an appraiser MUST consider on every appraisal. They are: sales comparison approach, cost approach and income approach. Look at your appraisal and see if the appraiser considered anything but the sales comparison. He probably did the cost approach, but usually they avoid the income approach. Most appraisers won’t rely on income or cost when their comparables suck, but I would. The problem is that the underwriters freak out when appraisers actually do their job and value anything other than sold comps. Someone else made a good point about the purchase price and the low rehab amount. We appraisers get called to the carpet frequently when we value something much higher than a recent sale. You may want to connect with an appraiser that is proficient in appraising income producing property and get one done ahead of time.

 Cost approach was around 256k. Income approach had it a little above 290k. Comps sale price: 309k 325k and then the one that hurt me 239k.

The shape of those properties id say is comparable to mine, maybe a little worst. I consider it a C class neighborhood 

 Uhm...I know I just went on and on about how contesting appraisals after the fact is a DB move, but at a glance here the market support provided by the appraiser does not appear to support the opinion. Are the sales over $300 so superior to yours? Are they even relevant then? Is that low-baller really the most relevant sale? If the opinion is going to be closer to $250k, where is the second sale supporting that? I'd be willing to bet you have an appraisal on your hands that is supported using adjustments, meaning they adjusted down the high ones. The problem with that is, adjustments are always subjective and generally not supportable. (I might have opened up a can of worms for myself there by saying that if any other appraisers are reading this - lol.) You might be able to get a second appraisal based on the simple fact the first opinion is not adequately supported. The general rule of thumb is that at least two of the three point to the conclusion. Low-balling is just as bad as high-balling. The monkey in the works here is the prior sale of the subject (your purchase). Why did you pay what you did? Do you believe you got a discounted price? Appraisers always must report and reconcile prior sales of a subject property because, they often are good indicators of current value. But if you can somehow prove you got it at a discount, you may have a better shot.

Look, most appraisers are good at what they do. But the truth is all professions have their duds. Maybe you did get a dud.

Lenders are by law not allowed to shop appraisals (anymore - lol). That means the lender needs to prove the appraisal is deficient before they can order and use a different one. That's not exactly easy to do when we are talking about an opinion. However, you might have some ammo in this case. You (the appraiser rather) simply only have one comp. Also, there is nothing stopping you from going to a different lender and starting over with a different appraiser if you end up feeling like the comps are out there and the appraiser simply didn't see it the way they ought to have.

LOL. Sorry. I probably should have read the thread more closely...I tend to ignore the parts where people start talking about the specifics of their valuations cause to me it's just another property with comps and value and everyone always seems to think they got screwed when they usually are just bitter it didn't work out like they wanted. Ok. I'm leaving now.

This thread was meant for education, so I appreciate the feedback! My rental is a 2/2, all comps were 3/2 4/2 and 4/2, so the adjustments were made on all three. The 3/2 was the one that was most comparable and closest to mine. But it was not a duplex, it had a separate cottage on the same lot. 

Correction, you have zero comps. And/or at the very least, highly questionable/zero support for the downward adjustment. Your guess of the property value down to the dollar is as good as the the appraisers opinion at that point, but the difference is the appraiser is licensed and is not allowed to guess. That appraiser could face sanction if a complaint was filed to the state. What is entirely possible and even likely, is you have an appraiser that ought to have withdrawn from the assignment due to a lack of market evidence. Instead, they went ahead anyways, signed the report that certifies they in fact did have adequate market data (FNMA form 1025, page 6, Appraiser's Certification #4), and invoiced the assignment. That's unethical. It also happens all the time, for reasons and justifications and grey areas that are too convoluted to go into here (or anywhere - lol).

The appraisal industry gots issues, which is a big reason why I no longer do it. When I have run into this myself, I have either withdrawn from the assignment or, required the appraisal be reported on a non-FNMA, general purpose appraisal form, that has language allowing the limited evidence (and sometimes that leads to a loss of the client!). In fact, the language in those appraisals specifically spells out the market data was less than adequate and the conclusions therefore "weaker" than typically expected. I would add in the report for good measure that I discussed the limitations with the lender prior to proceeding with the appraisal and the lender agreed to the limited reliability. I also get that confirmation in writing from the lender and put it in the work file. Lenders who keep the loans or do not sell to FNMA are usually ok with that, lenders that want to sell to FNMA are not. The biggest mistake your appraiser likely made was not offering an opinion of value that could be questioned, rather they likely failed to explain that to the client in no uncertain terms. And when you add the language of Cert #4, they likely presented a misleading report. These are the main points the USPAP requires of appraisers, to communicate in no uncertain terms to the client what they are getting and just as important, what they are not getting.

How is it possible an appraiser can develop a reliable sales comparison approach if they do not possess adequate market data?

I might ask the lender for a refund of the appraisal fee. If that did not work, I might directly ask the appraiser for a refund. But before I did that, I would read every word of the appraisal to see if the "evidence" was slipped in somewhere. Then again, maybe the least expensive option (because time is money) would be to just let it all go. That might be best for peace of mind too. But, $500 is $500. How about all the time and energy wasted? I know, much easier for me to take on that fight (because I am an appraiser and know the angles) than it would be for you.

What was supposed to happen, is you go to the lender, the lender asks for the appraisal fee up front, the lender goes to the appraiser, the appraiser goes back to the lender withdrawing from the assignment (citing a lack of data) and you get your money back. Instead, they all took you for a ride in hopes it would all work out. The underwriter ought to have identified a deficient appraisal too. And for what it's worth, plenty of lenders (not all) make a skim on the appraisal, calling it an administration fee (and not required to report it specifically on the settlement statement either - gotta love the lobbyists). You paid the lender in good faith they would hire a competent and ethical appraiser. I'm not convinced you got your moneys worth.

Boy, I sure pulled a 180 didn't I? 

The take-way for the future is, multi-family or other oddball properties that are less-than-typical are going to have limited sales data from which an appraiser can develop a reliable sales comparison approach. The lender is (suppose to?) going to require the appraisal be adequately supported with market evidence and more-so if the loan ends up at FNMA. If financing is part of the strategy at some point, it is prudent to take this into account. But, you know that all-too-well at this point.

Gee, I just can't seem to stay away from this one can I?

Nope.

PS - As an addition to the post before this one, not only should you look to prove you got a discount on the initial purchase, you should look to prove the improvements you made added value. The $6k you spent matters not, the affect on market value from the improvements is all that matters.

@Brian Ellis

Thanks for sharing Brian. It takes courage to 1) jump in and try and 2) share your experiences with the world so you should take pride in both. Well done!

I do feel like this is the trap for the BRRRR strategy, and should probably include a ‘Comp' step before trying the BRRRR. It seems like others have had similar results, and I know my brother and I have had a number of nail biter moments hoping for appraisals to come through.

Two questions- did you know what number you needed the appraisal to come in at and did you get the appraiser through the bank? Appraisers often have been given a number that will work for their employer (the bank) and then try their best to work towards that number, for better or for worse. Unfortunately appraisers stay employed by helping deals along and if the bank knows they can’t get the right number from them they will find someone else who will play ball.

Best of luck!

Christian

I've found that for this strategy is great on paper but difficult to execute perfectly. Every one of my appraisals has come in low, and I feel like I've got a good handle on how to comp a property. For example, I had a property we remodeled appraise for $272k on the first round. I ordered another appraisal (which are getting more and more expensive for some reason...) and it came in at $305k. So, did my property appreciate $33k in a month?! When it's come in short, I've had to leave a bit more in the property as equity, but overall it hasn't been too discouraging. Just learn to work around it.

 Thank you, If I go the square footage and rent price route, who do I bring that information to? The appraiser or the bank? 

Submit the information succinctly to your lender, and if they determine that the information is possibly useable, they will forward it to the appraiser.  

This post has been removed.

Originally posted by @James Eckhardt :

Thanks for sharing that Brian, next one will be a home run!!!

Thank you, sir. I am already working on my next deal, hoping this one knocks it out the park!

 

@Brian Ellis   Where in the South Shore are you located?  IT'S ONLY A FAILURE IF YOU STOP LOOKING FOR OTHER OPTIONS - I NEVER stop looking for other options, I'm doing 3 flips right now and the first one have gone horribly wrong but I've turned it around because I wouldn't quit (ill share my story once im done with them) .  If you can't refi you can still reinvest.

Try SDFCU (https://www.sdfcu.org/home-equity-loans) they may give you an HELOC for 95% LTV on your primary residence, you can take that money and buy another property potentially.

Hi @Redgy Saint-Germain thanks for the reply. I’m located in Bourne. I wasn’t able to pull any money out of that deal , but I am currently renovating another now. This one should work out good.

I’ll check out your recommendation! I’m glad you worked through that first deal 💪🏼

I'm new to this and so I don't mean this to sound critical. If you have equity in the property, why not just sell it? Use the cash to finance your next deal. I've been looking at the BRRRR method and, to me, until I got the appraisal back for doing the refinance, I wouldn't put it up for rent. If I can get my cash out, then I'd rent it, if not, sell it pocket the cash and move on. Maybe I'm missing something?

Originally posted by @Jim Holub :

I'm new to this and so I don't mean this to sound critical. If you have equity in the property, why not just sell it? Use the cash to finance your next deal. I've been looking at the BRRRR method and, to me, until I got the appraisal back for doing the refinance, I wouldn't put it up for rent. If I can get my cash out, then I'd rent it, if not, sell it pocket the cash and move on. Maybe I'm missing something?

Hi Jim,

The reason I didn't sell is because I still have strong cash flow. Around $400 a door. Secured equity and appreciation long term. Selling it would depend on my goals, but in my market 70k doesn't go very far with a 20% down payment. The best I could do is get a similar deal. 

So in short, im getting about 13% cash on cash return at that duplex. 

I hope I answered your questions! Good luck on your adventures!

 

Have you tried looking into A Heloc ? You can probably get a higher LTV. I am currently in the process of getting one on my investment property in Florida. Fixed rate Heloc. Originally I was looking into a cash out refinance, however the small amount I was able to borrow was not worth the closing costs. Much better option with the home equity line of credit. I will be using the funds to buy my next property.

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