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A Commercial "SFR Alf"

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Joined
Jun 2, 2007
Professional Status
Certified General Appraiser
State
Florida
There's nothing remarkable here, but because this is something of a special use I though I'd see what my AF brothers & sisters think before I sign & send the reports. I'm appraising the fee simple estate of the realty only (no going concern value, and there is no FF&E).

I only do commercial real estate (including "real" ALFs) but have seen several of these "SFR ALF" appraisal requests from different lenders over the years and, although normally decline, out of curiosity took two of them nearby (some economies of scale anyway).

They're typical standard SFRs in a typical SFR subdivision, without special zoning (SFR allowed only), and this particular city permits homes to be operated as assisted living facilities with a permit so it's all legal. They're three bedroom homes, indistinguishable from neighbors, except they have two ALF beds per room. Nothing complicated: buy a house, retrofit some life & safety not included in the original SFR, get a permit, take care of the patients, allow inspections and you're in the ALF business.

I found some "residential ALF" sales comparables and not surprisingly they don't vary much from typical sale prices within the subdivision. They're rare and somewhat dated, but easily and quickly paired.

So that's what I did. They're essentially SFR valuations since I don't see evidence of a compelling market for these and the life & safety equipment is not only old but also somewhat superadequate for what is on all accounts is going to be sold as a SFR.

I found two threads here on AF dealing with these but from the perspective of using them as comparables or neighborhood influences. One here and one here. They're interesting but not really relevant.

Anything going on here that I'm not seeing?
 

nstanbru

Senior Member
Joined
Feb 19, 2009
Professional Status
Certified General Appraiser
State
California
I've done a few of these and I came to the same conclusion you did in my area. Sales of these homes with the same use, at least in my area, are rare. The ones I did locate were bought by owner/occupants as their home. Just my opinion, but I think the reason is that the license to operate as an ALF, in my area, can't be easily be transferred (if at all in some cities).
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
In Illinois, single-family ALFs don't seem to be extremely common, although there are a couple out there, such as a sheltered care facility in Central IL. I have seen a couple attempts at making extremely small independent living facilities and one that was designed as a co-op, but they weren't SF houses and weren't successful. There are some small memory care facilities doing fairly well around here, but they also aren't SF houses. What is more common in IL is that in recent years, operators have switched to smaller arrangements for developmentally disabled residents designed out of a single-family house. These houses might have a few modifications, such as sprinkler system, but still basically a house. Based on the highest and best use as vacant, the modifications might cost several thousand, but do nothing to the real property value, except perhaps lower it. These properties are big moneymakers, and there is evidence of intangible asset value in many cases, but with the state's fiscal conditions, it isn't at the level that it would be elsewhere.
 
Joined
Jun 2, 2007
Professional Status
Certified General Appraiser
State
Florida
SNIP...These houses might have a few modifications, such as sprinkler system, but still basically a house. Based on the highest and best use as vacant, the modifications might cost several thousand, but do nothing to the real property value, except perhaps lower it. These properties are big moneymakers, and there is evidence of intangible asset value in many cases, but with the state's fiscal conditions, it isn't at the level that it would be elsewhere.
I suppose you could say that the going-concern is the marginal value of these.
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
ALF issues vary state to state.

Much depends on the registration and licensing laws, how and where the ALF gets its clients, (Referral services, like AMCs typical scam off all profits leaving payments to the care givers very slim) and the ability and knowledge of the business owner to access and produce Medicare billing for services has a large impact on financial viability of providing care and a care facility out of a home.

Many people just don't spend the time and money necessary for proper licensing, and training for Medicare billing, but rather rely on referral agents to do that for them. Referral agencies send a small stipends to support the patient/client, relying on the "but you CARE about them", claim when the money is short of the actual time and expense involved with some patient/clients.

So like many commercial real estate concerns, in an area of sophisticated operators making money, values for these properties all ready licensed and approved will be far different than in areas with many wannabe's taking in a tenant relying on other businesses to bill and pay for their service.

Never make friends with social workers. You learn more stuff than you ever want to know.

.
 

NachoPerito

Senior Member
Joined
Jul 25, 2012
Professional Status
Certified General Appraiser
State
Washington
I came to the same conclusion recently that the value was the same as an SFR. I was going to bid on one recently until the client stated that he needed us to do the income approach based on the existing income in place. The SGI was like $200k and the home was worth about $500k. I said no thanks.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I suppose you could say that the going-concern is the marginal value of these.
The properties that I appraised most recently did have intangible asset value, but the net income on one was roughly $140k and the home was worth about $100k. It just wasn't as much of an intangible value as it would have been in other states, due to Illinois' ongoing problems. FWIW the rates paid were not private pay.
 
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