All Forum Posts by: Kelly O'Quinn

@Chris Mason It's the most applicable and beneficial course I've taken so far. WAY more useful than the metes and bounds crap I learned in RE Principles ;-] It should be a prerequisite for obtaining your RE license. Property valuation seems so fluffy sometimes. I saw an appraisal once where the appraiser valued a dinky in-ground fire pit at $15,000 and included it as a separate line item on the report. Yeah...I want to see the market data showing a reasonable buyer would pay $15k for a 2 ft diameter fire pit. 

IMO, the only technical difference is the license. You can find great agents and appraisers who really take the time to do a proper valuation and you can find agents and appraisers who fudge it up, whether intentionally or not. From what I learned (and remember, so I'm sorry if some of this is faulty, as I took the class back in 2014) in my basic appraisal class, a proper appraisal should:

1) Bracket based on living area: Have one comp that's within 100 sf of the subject property; one that's 100+ sf bigger, but not more than 25% bigger; and one that's 100- sf smaller, but not more than 25% smaller.

2) Use comps that are similar in # of bedrooms. A 2 bedroom property is in its own class and should only be compared to other 2 bedroom properties. 3 & 4 bedroom properties are considered similar. 5+ are each considered in their own class.

3) At least one comp should be the same as far as condition is concerned (upgraded, remodeled, dated, a complete dump, etc.)

4) Figure out where your comps differ from the subject property: sf, # bedrooms, # bathrooms, condition, amenities (pool, AC, fireplace, garage size, etc.), then find comps that are the same except for that one feature to see the difference in selling price, then use that info to infer how much more a reasonable buyer would pay for a house that has that amenity vs one that's the same in every other way but without it. Adjust the comp's sale price by this number to determine the value of the subject property. E.g. Comp 1 sold for $200,000 and has a pool. Subject project is exactly the same in # bedrooms, # baths, sf, style, condition, and other amenities, except it doesn't have a pool. Your market research tells you that, all else equal, a reasonable buyer would pay $5,000 more for a house with a pool. Adjust the sale price of Comp 1 down to $195,000 for your valuation. Let's say that Comp 1 doesn't have central AC, but your subject property does, and your market research tells you a reasonable buyer is willing to pay $7,000 more for a house with central AC. Adjust the price of Comp 1 up $7,000 to $202,000.

5) Once you've adjusted the price for each comp, run the numbers to find the gross % change in value between the actual selling price and your adjusted value for each of them (in the example above, given there are no other adjustments, the gross % change would be 6%: $5k + $7k = $12k, $12k/$200k = 0.06.) The comp that has the smallest gross % change is the most similar to the subject property and the adjusted value for that comp should be used as your FMV.

I'm not a licensed appraiser, just took a damn good class on it and am hoping my memory serves me well in recounting the main points. Hopefully this is helpful and please forgive me if I got bits of it wrong!

Hey @Corey Reyment! Great idea - we do the exact same thing you're planning on and it works great. We use a VoIP phone system in our office and I think my broker just signed on for a secondary phone number for the hotline. He set it up so that when someone calls the hotline number, it goes directly to voicemail and our outgoing message on the voicemail lists details of properties we currently have available for rent. The only sort of annoying thing is making sure to update the outgoing voicemail message whenever our available rentals change. Then the prospective tenant can leave us a voicemail message which goes to our email and we're able to call them back when we have time. The VoIP system we use is called Nextiva. Another option could be using Google Voice. Best of luck to you!

I strongly recommend against buying in LB right now. There is a big fight for tenants' rights, including city-wide rent control, making credit reports valid for 90 days for screening tenants (meaning if a tenant has a credit report from 3 months ago, you as the landlord would not be able to run a new one on them for screening purposes - there is a LOT someone can do to ruin their credit in 3 months!), REAP (info at the link below), and many other ideas that are fantastically beneficial to tenants and seriously damaging to landlords. They even have their own tenants' union, "Housing Long Beach." The reason rental property owners in LB are selling is likely partly due to their distaste for the local politics and the potential legal and financial implications for their business (plus, the market is hot and values are up!) Check out the Better Housing for Long Beach website for more info on the current happenings.

Hi Mario,

It's going to be very difficult (if not impossible) to get exact utility costs for a property because it will depend on how much the tenant uses the utilities. For your proforma calculations, I recommend calling local property management companies and asking what their utilities run, on average, for small multi-families in the area. You could also ask the seller for their P&L statement, but there's no way to guarantee they're telling the truth. I'd do more research here in the forums to find good rules of thumb for estimating rental property expenses and plug in the most conservative numbers you can find for our area. The company I work for manages approx. 100 units in the LA area and the average expenses for our stabilized properties run around 40% of rental income, less vacancy expense (this does not include principal & interest, and I used three years of data to average out the expenses, so I would figure a bit higher to include all possible capital expenditure items.) If you need help on specific numbers and working out your analysis sheet, please PM me. Best of luck to you!

I completely agree with @Christopher Newman. I took my exam in 2014; only 4 questions involved math, and it was math I could do with a basic calculator. I've heard very good things about the 10bii financial calculator, especially for time value of money calculations. Another good one (and the one I use) is the Texas Instruments BAII. I seriously haven't used a damn thing I learned in the basic courses to sit for the exam, except it's fun to know the definitions of escheat and easement to impress family members at the holidays. I strongly recommend taking a crash course from someone like RE Trainers before the exam - I do not think I would have passed the first time without taking their weekend course and studying their flash cards and app.

I also second Christopher in asking what the heck the T method is???

Check Marcus & Millichap and IRR.com reports for an estimate of vacancy rate in your area. Vacancy for residential units varies greatly between markets, sometimes even within the same region, so if you don't have a satisfactory number from their reports, try calling local property management companies and asking them.

You said you're looking at commercial - what kind of commercial do you mean? Large multi-family? Retail? Office space? Storage units? The type of asset you're looking at is incredibly important in determining the proforma expenses to consider. Can you give us more information on what type of asset you're looking at so we can give you better guidance instead of a shotgun approach?

@Nick Mercurio Do you still have the 5 unit in Riverside available? If so, could you send me the info?

@Mike R. A cute 3 bed/2 bath, 1,362 sf cabin in Crestline came up on Homepath today for $183,750! Looks turnkey from the pictures, but you never know until you go look. I think I've been seeing more Homepath properties in the Crestline area and other towns on/near the mountain that aren't Big Bear proper. Worth a look. Here's the link: Homepath Listing

@Cabri Griffin This is a long shot and not sure if it'll be worth your time, but does he know who owns his mortgages? If they aren't owned by the big banks or institutions, the owner of the note may be willing to work out a loan modification or discounted payoff for him with much more flexible terms. I'm still new to the note business, but check out the stuff on that forum to give you some ideas of what's possible. Bob Malecki & Dave Van Horn have some great posts on note investing in the forums and blogs and have both been on the BP podcast. That said, your heart is in the right place, but make sure to protect yourself. This is a business. Do a cost-benefit analysis, know the opportunity cost of taking on a project like this, and don't be afraid to walk away if it's not the right opportunity for you.