All Forum Posts by: Brad S.

Quote from @Lucas Martinez:

B2 has less hallway space, giving you more room for useful things, like a walk-in laundry and larger living room. Feels better to me. 

 Thank You. That's what I thought as well.

Here are 2 floorplans for the same proposed rental unit. I am curious as to your opinion between them. Which you like better, why, and if you have any suggestions (They are labeled B1 and B2 on bottom left). This is a 2nd floor (top flr) of a proposed 2 unit building with very limited allowable floor area (800sf gla max) and setbacks, so the shape and size of the footprint can't be altered. TIA

Quote from @Matt Devincenzo:

Probably the bottom floor plan. The 2/2 unit will likely be more desireable for a roomate situation and possibly get higher rents, especially if for whatever reason you chose to do STR or furnished.

Matt, thank you for your comment! I appreciate it!  

Quote from @Richard F.:

Aloha,

A2, bedrooms well separated.

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 Aloha Richard,

My wife's dad grew up on Lanai!  I still need to make a trip with my wife to Maui, where she was partly raised.

Anyway, thank you for your comment!

Here are 2 floorplans for the same proposed rental unit.  I am curious as to your opinion between them. Which you like better, why, and if you have any suggestions (They are labeled A1 and A2 on bottom left). This is a bottom floor of a proposed 2 unit building with very limited allowable floor area (800sf gla max) and setbacks, so the shape and size of the footprint can't be altered. And there needs to be room for the stairs to the upper unit. I may post the upper unit floorplans also. TIA

Quote from @Kuba Waszywski:

From what i have heard, lender's appraisal will always come back to match 'contract sale price'. with 20% down their risk is probably low, even if the home sale price should really be 5-10% lower. 

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Not ALWAYS, but much of the time the appraisal will come in at contract price. But, I have come in both below and above contract prices many times over my career (as an Appraiser).  It depends on a lot of factors, as @Deandre P. said the appraiser is a neutral 3rd party, while they should take the contract into account, it is only one part of the transaction, especially if the price was determined last year.

So, yes, you can order your own appraisal, but that would only be for you and could not be used by any lender for loan purposes (unless it is a hard money or private lender). The lender is required to have the appraisal ordered independently, by someone not getting compensated by the loan closing. It's usually ordered by a different department within the lender or through a separate appraisal management company.

Whether or not you can renegotiate the price depends on your contract. You should reread it and possibly have an attorney review it and ask them. It might be worth it for you to pay for legal advice for this. Good luck

Quote from @Trent Barga:

 Good point on the refi. They are 2 4 units on different tax ids. I was using a local bank so I was planning on purchasing as a commercial together and then hopefully refi the same way.

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it sounds like they are 2 legal parcels, each with a fourplex, so basically, a package deal with 2 residential properties (4 units or less per parcel). A commercial property would be 5+ units on 1 legal parcel. Most banks will look at these as 2 separate residential properties, unless they are a portfolio lender or can do a blanket loan. And appraisers will value them separately, as 2 residential properties (2-fourplexes).

So, first thing I would do is double check with the lender you are using and let them know the situation, so you don't have any surprises. And if they are individual residential properties (4 units each parcel), then the income approach will typically hold significantly less weight, and in my markets, the income approach will hold very little weight. Sales comparison approach will probably be the main valuing approach.

@Robert Galop

Welcome Robert! There’s a lot of good people and knowledge on here. Have you decided which part of RE investing you want to focus on? And, are you hoping to leave your current profession to pursue RE Investing exclusively?

@Mike Hsiao

1-4 unit is a residential property, 5+ are commercial properties. It’s best not to use the 7 unit to comp out the 4 unit.

In appraisal speak, this is a complex assignment, due to lack of relevant data. We (Appraisers) would approach it multiple ways, but first off, I would and do not use $/sf for a residential valuation, especially not for multi unit properties. That doesn’t take into account all the other differences between properties. Would a 2k sf, 4plex, with four 2 bedrooms units, built in 2022, located 1 block from the beach, have the same value as a 2k sf 4plex with all studio units, located on a main street, 1/2 mile from the beach. They would have drastically different $/sf, which wouldn’t help the evaluation much.

So, a few different ways to approach it would be:

1) go back in time. - go back multiple years in the market area/neighborhood and find any 4-unit sales you can, then determine a reasonable “time adjustment” to use on each comp, based on when they sold and the changing market conditions since the. (I.e. appreciation, etc)

2) find any recent 2-4 unit sales in the neighborhood and determine a reasonable adjustment for unit # differences. So, if you estimate a triplex would sell for $50k less then a quad, then you adjust the triplex up 50k, etc.

3) find recent quad sales in neighboring market areas and determine a reasonable adjustment for location appeal. So, if the comp is located in an area that may have a 10% greater appeal, you’d adjust its sale price down 10%, to account for the Subject’s inferior location.

4) Determine a reasonable GRM (gross rent multiplier) and apply that to any missing units of your comps. So, if you determine a reasonable grm for 2-4 unit properties in the area is 100, and you have a triplex comp in the neighborhood, which is missing a 4th 2 bed/2 bath unit (as compared to the Subject), and typical rent for that 2 bed unit would be $1,500, then you could multiply $1,500 x 100 (grm), to get $150k estimate for that missing 4th unit. Add that to you triplex comps, and Abracadabra, it's magic!

Now, I don’t really expect you to do all or even many of these things, but those are some proper ways of valuing your Subject. Sometimes those situations can be better, since the valuation is not clear and may present opportunities others don’t see.

@Edwin Lopez

As others have said, the HOA can be a pain and the dues can change, etc, and it really depends on other factors, like location. Etc

The answer to your second question is Yes, a condo might appreciate like an sfr. I have a condo located on a lake that I bought in a growing market many years ago. And while the HOA has been been challenging, this unit appreciated more than a nearby sfr I bought around the same time.