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2 Family In A High End Summer Market. Best Way To Do The Income Approach

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BROOKLYNVALUATION

Sophomore Member
Joined
Apr 16, 2010
Professional Status
Certified Residential Appraiser
State
New York
Hi All

I am appraising a 2 family.....main house ( 8,3,1.5, 1850 sft ) ( and a separate 1 bedroom art studio, 2 story, 1 bedroom loft type, 800 sft )......in the village....historic......renovated in the past 15 years, medium quality, old charm.

The challenge is the income approach. For most landlords in this area ( North Fork Wine Country of Long Island...not quite the Hamptons, but definitely has risen in profile the past 10 years, along with rents, sales prices, # of vineyards, visitors from NYC Urbanites )......

The landlords' favorite option is to max out seasonal summer rentals between Mem Day and Labor Day " Mem-Labor Day: $50,000, Aug-Labor Day: $20,000, June: $10,000, July: $20,000, Jul-Aug: $40,000, Weekly: $5,000, Off Season: $2,500 Per Week. An Enchanted Home Just Moments From The Center Of xxxx. Lovely Renovations Throughout. Master Bdrm With Views Of Water. Old World Charm With Modern Updates."......and then do a winter rental from Sept 15 to May 15 for normal prices......year round is the last resort as it creates more wear and tear and does not maximize rental income

Which rents to I try and use within the 1025 ? Annual - combining potential summer/winter breakdown.....or year round ?

Any thoughts appreciated, as I think the income approach is far more complex than a typical 2 family with year round tenants.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
that's a tough one and I don't know the answer...are most of these properties rented annually, or seasonally? If they are purchased with investors planning to do seasonal to max out income, the prices would reflect that, which would seem to be the HBU. Whether a lender would lend on a property with seasonal rents if typical for area probably?. Imo winter rental and summer rental would work better than the instability of weekly rentals during summer months becomes hotel type use more wear and tear

When you do your research for comps of similar sold properties see what the rents were and if they were rented seasonally or annually...that should help answer the question
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
With seasonal rentals cometh seasonal vacancy (rates), transient operational expenses and income property risks to go along with those "rewards"

If you are looking to enter the world of income properties you'll need to be aware of all the issues
 
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