Time to add the next chapter of this journey. We just finished re-roofing the house and got the appraisal done. In the end we will close the 1st BRRR loop of our investing career. with a 100,000 purchase 55,000 in renovation costs (lessons learned!), and a 140,000 cash out on a 190,000 ARV value. The triplex rents for 950, 900, and 775.
Lesson 1, treat small multi family units like they are single family the looks matter more than the guts. We had to appeal the initial value and increased it from 145 to 190k, because the appraiser said it was fine to have the appraisal done in the middle of the re-roof. The 1st line of the reason for the low value was roofing in bad repair.
Lesson 2, work with your realtor to line favorable comps and provide them to the appraiser. Thank you@Michael Noto I can't recommend him enough if you are a serious investor in central Connecticut. Working with him I was able to quickly get more reasonable comparisons to my tri-plex than the ones used in the appraisal.
Lesson 3, Prepare a logical response. Which I am including in:
Good morning Mike,
I really appreciate working with Berkshire Bank on this to sort through what is a low appraisal. There are some key discrepancies in the report I would like to point out.
The first item on the report to discuss is the roof condition. When we started working on through the appraisal of the property we disclosed that we were fully re-roofing (strip and re-sheathing) the roof. We delayed the appraiser coming out to the property to reflect, this but due to the weather they came out during the middle of the re-roof not at the completion. I am attaching the signed contract and a picture of the completed re-roof. This was discussed with the appraiser, but apparently the on site person was only taking pictures, not completing the full appraisal.
The second item for your consideration is the comparables which were used- which were all from the July of 2015. I worked with my realtor: Michael Noto of Salcal Realty to pull more recent comparable properties. The first is 21 Lyons Street which was a short sale for $169,000 on a $185,000 bank appraised value. This house is in worse condition than 171 Bassett and in need of renovation. The second house is 88 Garden Street, which sold for $194,600. This house is very comparable condition wise with each unit having a separated laundry, and full refurbishment of the interior of the units. The third house is 95 Columbia, which sold for $199,000. The discrepancy with this house is that it currently has 1 electric heating unit, and 2 gas heat. We have 2 gas furnaces and 1 gas boiler- two of which are brand new in 2015. The fourth and final comparable is 191 Hart Street, which sold for $205,000. This house is the best side by side comparable to 171 Bassett. I have attached sales cards for each of these housing units to this email.
The last comment in the appraisal report I would like to bring to your attention is that the zoning is R2, but this is a functional tri-plex. All of the units which I have provided as comparables are all in identical zoning, where they have legal tri-plexes in an R2 zoning.
Thank you for considering this information, and I look forward to your response.
Bill
