Appraise as SFR or MF?

[Johnny Knucks]

Do zoning or local ordinances even permit this? Any others in the neighborhood being used this way, and more importantly, sold this way (to see if any premium is being paid).

The city sends out inspectors and it's legit.

 

[Johnny Knucks]

Sharing the kitchen and baths kinda bothers me. Does the owner stay in one bedroom?

Who has first rights on the kitchen and baths and TV or whatever?

Is food delivered to the occupants?

Surely you have a rent roll and income/expense statement.

Are the utilities split between occupants? It is confusing to me personally. Who handles the maintenance?

Me personally, I would want 2-3 years of rent roll and income/expense statements or it would be no go. I would also require inspection of each bedroom.

Owner does not occupy the property. Yes these are long term tenants with leases. Owner handles all utilities and maintenance. They have strict rules they must obey. My inclination is to appraise it as a SFR and include a RS but how do I do that when there are 4 separate renters?

 

[Tom D]

Technically here big city, you can have 3 unrelated people renting a single family home. What is the rule there. If current use permitted, then it's still a single family. Doing the rent sched & income operating statement should be fun. But a photo of 4 electric meters might kill the thought with a lender. I have never seen that done here with sf separate meters, big city universities. You certainly can put separate rents on the income operating statement. Stip, please provide 2 sf sales with multiple electric meters to determine marketability. I see it coming in my crystal ball.

But why are you asking us, should the lender have told you already.

 

[JTip]

She has inspections from the city and everything.

Not a SF, not a MF.

It's a long term hotel, boarding house, rooming house, whatever you want to call it.

Get your trip fee and move on to the next one.

 

[Tom D]

One shared bathroom & kitchen is not the definition of 2-4 units. The question is it more a commercial or residential loan. A lot of times the lender doesn't know the exact info on the subject when they order it..

 

[sputnam]

I have a property located in Baltimore that is a SFR, but the owner rents each bedroom separately, with a common LDK on the first level and a common bath on the 2nd. There are long term renters with verifiable contracts. It's worth way more as an investment, but remove the bedroom locks and it's just a SFR. It's a private sale but will eventually require a bank loan, and I don't want to leave the buyers in the lurch.

It's neither exactly.... but, if your assignment is for market value, what is the Highest and Best Use? That's how you appraise it.

I've done a number of these, though not recently. Common near the University. It's a rooming house.

 

[CCAAMO]

People rent out rooms in their homes all the time and it does not make it an MFU or a hotel. Just like a STR if you want to use the income to value it it would need to be based on market rents for the home, not the rooms for 6 month minimum. What does the City say as to the zoning and legal use?

 

[alebrewer]

Interesting that no one has mentioned zoning (other than GH's passing comment about the legality of structures). Seems to me that research of the legal uses could potentially help drive the H&BU analysis.

 

[George Hatch]

All RE is local but in my state SFR zoning usually allows for 6 unrelated occupants without any further permitting. Also allows small group homes.

We appraise property rights, not properties as such. If the ownership was using the property to operate a prn studio or a meth lab we would still be valuing the sticks and bricks, not the revenue from the business. Single room occupancy operations and hospitality rentals and board/care operations all make use of the realty but those operations also include a significant management and non-realty component as well. Assets which a mortgage lender will usually not get back if the loan fails and they foreclose.

The typical buyer for this property will include normal SFR buyers for single occupancy, so the comps will most likely include other un-modified SFRs. That can change if the current condfiguration includes modifications for a specific type of occupancy such as adding exterior doors for each room or additional baths beyond what's typical for an SFR of that size or parking lot improvements or a retail storefront or whatever. But you're still trying to identify the typical buyers and what those typical buyers are considering as the reasonable substitute.

 

[Vermonter]

I mean it sounds like a SFR rented by multiple roommates.