Multi Family used as a rehab center

[Dale Floyd]

If it’s legal use is only a 2-4 family dwelling, you don’t need a certified general to complete the report.

Whoever appraises it, is going to say the exact same thing and value it credibly in the same fashion. HBU is 2-4 family residence and it must be valued as such because it cannot market any other way.

In some areas, we have experienced some counseling centers who offer residential oversight for former addicts. They’ll buy a home, fill each bedroom, and assign oversight employees to stay there with them 24-7 until they ever (if ever) are able to move out on their own. These places have quite an impact on a residential community because things tend to happen occasionally. Sometimes the zoning or the restrictions are insufficient. Can’t protect everybody from everything.

 

[Zoe]

Dollar amt may be around a million for certified residential with commercial use? I don't know. The terms of lease and who the landlord and tenant ( in simple terms is huge). Intended use and user also.

I don't how the property is classified either. Is it classified as commercial or residential?

Too many unknowns for me to give a great answer.

A duplex in county I live in is classified commercial by the assessor. A certifed residential can do the appraisal as long as it is not over $1 million maybe. Maybe $2million. I don't know the limits on dollar amount/value.

 

[sputnam]

Dollar amt may be around a million for certified residential with commercial use? I don't know.

Certified residential appraisers can appraise 1-4 family properties that have transaction value of less than $1,000,000. The gray area is... there's no definitive explanation of what 'transaction amount' means. Is it the sales price? The loan amount? That has never been made clear.

 

[Tom D]

The post says rooms are rented out. This typically means almost like a boarding group house. I think the poster has used the term 'rehab center' incorrectly. You commercial people are chewing on the wrong bone. Maybe the poster doesn't really understand the use, just like some of yous calling it a commercial use. In my city you can have 3 unrelated people living in a rental unit, or any amount of family members. The rehab center has the 'master' lease for this residential unit use of housing their patients to live there temporarily.

 

[sputnam]

The post says rooms are rented out. This typically means almost like a boarding group house. I think the poster has used the term 'rehab center' incorrectly. You commercial people are chewing on the wrong bone. Maybe the poster doesn't really understand the use, just like some of yous calling it a commercial use. In my city you can have 3 unrelated people living in a rental unit, or any amount of family members. The rehab center has the 'master' lease for this residential unit use of housing their patients to live there temporarily.

I didn't see anyone call it a commercial use. I saw an OP asking if the property needed to be appraised by a commercial appraiser.

 

[Zoe]

Certified residential appraisers can appraise 1-4 family properties that have transaction value of less than $1,000,000. The gray area is... there's no definitive explanation of what 'transaction amount' means. Is it the sales price? The loan amount? That has never been made clear.

Okay, the bigger issue here most likely is if the appraiser can perform income capitalization approach and/or rent multiplier approach in sale comparison approach.

 

[Tom D]

You are getting more rent because of the risk seen by the other tenant, who may not want to pay market rent having ex drug users right there. I wouldn't. So things may balance out with the grm approach. But on a 2-4, that isn't the only approach to value. Just like a airbnb rental single family, doesn't mean it's worth more than the other normal monthly rent s/f homes. Your thinking commercial again, not residential.

 

[Zoe]

I know the appraiser as certified residential can perform cost approach.

 

[Zoe]

You are getting more rent because of the risk seen by the other tenant, who may not want to pay market rent having ex drug users right there. I wouldn't. So things may balance out with the grm approach. But on a 2-4, that isn't the only approach to value. Just like a airbnb rental single family, doesn't mean it's worth more than the other normal monthly rent s/f homes. Your thinking commercial again, not residential.

you don't know the terms of a lease. or lessor or lessee. Big problem.

The lease would be major requirement from the client.

 

[Tom D]

I've seen this before. It's called a master lease where some organization is the lease holder, their name is on it. They are responsible for the unit. The put in whomever they want, whenever they want. They collect the money from some gov agency. It's a pretty safe, above market rent, lease since they are they ones responsible, not the people housed in the rooms. It's like a walmart lease, but instead of merchandize, they house their people. Depending on the size, the smaller places go unnoticed by the neighbors. The bigger places might have neighbors not wanting them there issues. And see if the rent for the other unit is market rent, or below market rent because of the tenants in the other unit. External depreciation perhaps, discounted rent for the other unit.