1025 Rental Comps

[ZZGAMAZZ]

I've always tried to include active listings in the rental income section in order to include as many comparables as possible in the appraisal report.

Do peers typically use the same comps for the SCA and RI approaches?

 

[Lee Lansford]

I've always tried to include active listings in the rental income section in order to include as many comparables as possible in the appraisal report.

Do peers typically use the same comps for the SCA and RI approaches?

For development of the subject's market rent, use the most current and reliable rental data available.

 

[Randolph Kinney]

I use both. It really depends on how comparable they are and to what degree the market is changing.

 

[23Degrees]

When I did 1025's both were suitable. Some overlap of the two sections in terms of comparables used was not uncommon.

I have not done a 1025 in quite a while - apparently I priced myself out of this category as I've often found that clients were not willing to pay what I felt these things are worth. I don't miss them but I do have a question to throw out there that has always bugged me about this form and it deals with this specific section so I'll apologize for the tangent and potential hijack but this thread topic is a good opening:

In the rental section the rental comparables are added not as individual rental units but as a group within a specific property address. This creates somewhat of a problem in my view. Ideally I always would want to pick and choose individual units to add as rental comparables but an awkwardness was created by the format of the form.

If I found an income property that had one unit that matched up perfectly with one of the units from the subject, and two completely irrelevant units my instinct was to leave those two out as at best they were simply not relevant. Maybe they were not recent rentals, maybe they were significantly smaller or larger than the units of interest etc. If I left them out I would get stipped to add in the missing unit data and in one case an internal reviewer expressed some level of outrage that the irrelevant units were not included. If I added them in I'd often get questioned on my interpretation due to all the skat data that was added in and would constantly have to point people to commentary that said units x,y,z were completely irrelevant to the current analysis. Ultimately I would often find that the best rental comparables were individual units taken from a selection of maybe five to eight properties. I could add additional rental comparable sheets to account for the additional properties but I was still getting stipped to stick in the "missing" data which only added confusion to the situation.

If you have a property with one or two relevant and/or ideal units for your rental analysis and one or two completely irrelevant units or data what is your approach to the entry?

Would not a better format of this section of the form be to breakdown the subject into its units and have a comparable grid for each of the individual units.

 

[ZZGAMAZZ]

I encounter that dilemma in almost every assignment I get because the subject is always a 3-plex in a market with nothing but duplex or quadraplex improvements, or the subject's bedroom count is 1 and 1 in a market with nothing but 2 and 2, or mine is 2 and 2 in a market with nothing but 1's and 3's. Another issue is the fact that all of the units are rarely occupied and I'm not comfortable using 3 actual and 1 pro forma rent to establish the total rent upon which the GRM is based. Etc., etc., etc. Maybe it's not just me who had a heckofa time figuring out this form, or maybe it's not functional as you suggest. Thanks.

 

[CANative]

You can use the listings as some of the data in determining a market rent opinion. You should use sales to develop the GRM estimate. Make sure you vet the information because rental rates of listings and sales my not represent current rates as they may have long term tenants. Many landlords will not raise the rental rate of good tenants because good tenants paying less than market might be better than poor tenants sometimes paying market.

 

[Mejappz]

I encounter that dilemma in almost every assignment I get because the subject is always a 3-plex in a market with nothing but duplex or quadraplex improvements, or the subject's bedroom count is 1 and 1 in a market with nothing but 2 and 2, or mine is 2 and 2 in a market with nothing but 1's and 3's. Another issue is the fact that all of the units are rarely occupied and I'm not comfortable using 3 actual and 1 pro forma rent to establish the total rent upon which the GRM is based. Etc., etc., etc. Maybe it's not just me who had a heckofa time figuring out this form, or maybe it's not functional as you suggest. Thanks.

This is what I am seeing as well. Like 23 Degrees I haven’t accepted a 1025 in over eight months clients do not pay the appropriate fee or give sufficient time to complete this type of assignment.

I have also noticed that rental rates included in the MLS for these types of properties has deteriorated in the past twelve to eighteen months. Has anybody else noticed this? Granted, rental rates don’t fluctuate nearly as much as sales price but it would be nice to have better data to complete these.

In the past I have used a combination of MLS, FNC DataExpress (which sometimes has some rental information from previous appraisal reports) and I will try to contact the landlord but for the most part they are not helpful. What other data vendors or sources do you guys use to complete these types of assignments?

 

[Verne Hebert]

It is the old fashion way here. Newspaper, property management companies; then put your shoes on, get out from behind the desk and knock on doors of renters.

You definitely can't get the fees here any more.

I always like the NRSF method to develop value on these.

 

[Michigan CG]

It is the old fashion way here. Newspaper, property management companies; then put your shoes on, get out from behind the desk and knock on doors of renters.........

OMG....are you nuts? The horror..........we can't do that..........verifying.........quit it......all of the people in (insert state here) are crazy. It might work in your neighborhood but never (insert state here).