4 Or 5 Units?

[DanBuck]

Dan, where is the property located?

westchester

 

[DanBuck]

Obviously it is difficult without being there and seeing for ourselves, but here are a couple of questions/observations that I have in no particular order.

- There are five electric meters, but six breaker boxes. The far left meter feeds the far left box and then there appears to be a sub-feed from that box to the one below and slightly to the left. The boxes do appear to be labeled. Write down the labeling and mark off the units you have inspected.

- What areas of the building do the units you have seen occupy and what areas did the owner tell you couldn't be accessed? I would start on the lowest level and make sure I have inspected all of those areas and then move up until you reach the top level. Have you been in the attic. I noted there is an A/C unit up there and also one of the other pictures shows what looks like a partial fire escape/metal porch leading from a doorway. From a safety standpoint is this door blocked or some how secured in order to prevent access to the metal platform? My college fraternity house had a platform like that out of the attic level sack room where everyone slept and it was referred to as the **** porch.

- One of your pictures (showing the four gas meters) shows five windows (four in the yellow section and one in the white section) with window air conditioners. This is only one side of the building, what do you see on the other sides. Might there be another gas meter associated with the white building.

- What is the apartment rent breakdown? I believe you mentioned you have seen or have copies of the leases and if not you can ask the owner what is the current monthly rental rate for each of the units. You should also ask the owner about his occupancy rate. Then you can take the stated monthly rent for the four units and multiple by 12 and the resulting number should be equal to or greater than the annual income being reported on the income and expense statement. Obviously vacancy would cause the actual reported rental income to be lower than your gross calculation.

- I would hope the lender has provided you with multiple years of income and expense numbers. Look for income and expense fluctuations. If reported income is higher than should be generated by a four unit that could be a tip. Also if the income is fairly steady but the utility expenses are higher one year it may be an indication of a vacancy with the owner paying the utilities for several months on a vacant unit.

- Looks like there maybe a garage to the left in one of the back side pictures. Did you see inside of the garage? Might this be the fifth unit?

- If you saw three of the supposed four units, where did he tell you the fourth unit was located? Does that area match up with the portion of the building you didn't see. In other words does the estimate size/location of the unit seem reasonable in relation to the building area not observed.

- If I were a betting man and based on what pictures and comments you have made I would bet there are five units and I wouldn't be surprised that there might not be an extra sleeping room or two. Were there any common areas with a TV, bathroom, cooking facility, etc.?

- Is your client (the lender) a traditional lender ie. Bank type, or is it a lender where the loan originator might be on some sort of commission?. I have to wonder if this same property owner has several other properties that you are also appraising, wasn't coached to state this property was a 1-4 unit in order to get financing. A traditional lender would handle this building as either a 1-4 or commercial. A non-traditional that packages and sells all of their loans probably only deals with 1-4 unit properties and doesn't have an outlet for properties with five or more units.

- I am assuming you have researched the local MLS going back a number of years to see if it shows any listings or sales of this building. When did this property last sell? If it was in the last 5 to 10 years you might try finding the seller and asking them about the property. Just tell them you are looking for a little history and/or background on it. Maybe trying to verify any remodeling, updating, etc. and wondering if permits were pulled and who did the work.

Be sure to keep us informed as you move forward and let us know how things turn out.

Great great post. So basically spent the whole day there and in the building department. Just to update-As a couple pointed out, the assessor seems to be behind and is not consistent with the building department which does show in their private records that this building somehow became a 4 unit property. There are four mailboxes as well. It is a traditional lender. However, the supposed C/O is unclear... Haven't been able to get through to the inspector about it. i combed through hundreds of documents on their private database. Seems there are many outstanding violations but im not sure if this renders it not legal or not possible to lend on. A couple attachments are below.

 

[DTB]

What a mess.

This is worth what 250ish?

 

[DanBuck]

Does the municipality do rental certifications? Occupancy Certs? How many of those are there for that building? Records might say 5+ but records can be outdated. Occupancy and rental certs are usually more up to date and you can never assume the local gov't left hand knows what the right is doing.

You were right about that. assesor and building department are just not in consistency with each other and their offices are just across the hall from each other...Go figure.

 

[DanBuck]

What a mess.

This is worth what 250ish?

It is. I'm actually going through the records-it shows that there was a C/O given in 2017 subject to certain conditions. That recent document shows there now are issues and violations. The question is do violations matter enough not to lend on.

 

[DTB]

It is. I'm actually going through the records-it shows that there was a C/O given in 2017 subject to certain conditions. That recent document shows there now are issues and violations. The question is do violations matter enough not to lend on.

Depends what they are and the cost/effort needed to remediate.

I bought one place with 53K in violation fines. All stemmed from an illegal basement apartment with the rest just piling on. Gutted the basement for 2K, went to court, all fines waived. 51K afternoon. Quite memorable.

 

[Artemis Fowl]

You were right about that. assesor and building department are just not in consistency with each other and their offices are just across the hall from each other...Go figure.

Different job descriptions and responsibilities...frankly there is likely no time or money to sync the records in that way. Same thing in my community. We made an effort to remedy some of those types of issues and it caused way more problems than it solved. Just caused resistance and confusion in a department that was kinda set in its ways. We figured it best to work the devil-we-know.

I've said it in other threads: Consider assessor public record data reference only when conflicting info exists that may be more credible. It should be the 1st place to look for basic info but not the last when current detail is required.

 

[DanBuck]

Depends what they are and the cost/effort needed to remediate.

I bought one place with 53K in violation fines. All stemmed from an illegal basement apartment with the rest just piling on. Gutted the basement for 2K, went to court, all fines waived. 51K afternoon. Quite memorable.

I see-wow. The question is-these properties were not "lendable" by any institution just a couple years back. In that case, do you look at these violations as more serious than another property that at least had a mortgage on it, as this one never got off the ground as a legal "trouble free" property to begin with..

 

[DTB]

I see-wow. The question is-these properties were not "lendable" by any institution just a couple years back. In that case, do you look at these violations as more serious than another property that at least had a mortgage on it, as this one never got off the ground as a legal "trouble free" property to begin with..

I'm having a hard time following the gif of COO and other document.

It looks like there was a restaurant there at some point and that was remodeled into 2 apartments. Then an illegal apartment was also added in the basement. It looks like all that was cleared up in 2017? Is the fire inspection ticket cleared up as well? What is the 4/18 date regarding?

Given all that, maybe the extra breaker boxes were for the restaurant operations? Seems pretty much like everything now agrees with 4 units. Did you find a 5th bath anywhere?

Regarding your question, I would not treat these violations differently from another property just because the other property had a mortgage. That doesn't mean a thing to me.

 

[DanBuck]

I'm having a hard time following the gif of COO and other document.

It looks like there was a restaurant there at some point and that was remodeled into 2 apartments. Then an illegal apartment was also added in the basement. It looks like all that was cleared up in 2017? Is the fire inspection ticket cleared up as well? What is the 4/18 date regarding?

Given all that, maybe the extra breaker boxes were for the restaurant operations? Seems pretty much like everything now agrees with 4 units. Did you find a 5th bath anywhere?

Regarding your question, I would not treat these violations differently from another property just because the other property had a mortgage. That doesn't mean a thing to me.

I'm sorry you couldn't read it properly but i guess you read it correctly when its closed out-it means its been resolved? The town inspector wont respond still so Im putting together the pieces together here with your assistance.

And yes it would seem to be 4- a messy 4, but a legal one. I didn't get to see any extra bathroom yet-I probably wont attribute any extra value for it anyways(I think that one was in the basement unit that had to be ripped out..

The building assistant or whoever over there mentioned that the outstanding violations she sees here- are like you said- outstanding fire violations. Now is that a problem for a conventional mortgage, that I would have to ask bank now or simply just write into the appraisal report and let them decide? Because this was a fixer upper Im paying more attention to these violations than normal.

P.S - Im tending to agree with you on the restaurant thing. It also happened to have been a church as well at a point.

Thanks for your time.