Appraising In An Airbnb World

[SteveSpy]

Hello:

Looking for guidance on appraising properties being/ to be utilized as an AirBnB rental.

I recently inspected a large older SF home that was purchased and remodeled ~ 8 years ago. The owner lives in the home and rents out the other bedrooms and open space within the home on AirBnb.

There are 6 bedrooms above grade (5 are rented), there are 2 more bedrooms in the basement that are rented and there are open 'loft areas' with bunk-beds that are also apparently rented. Rates run from ~$50 per nite to ~$10 for a bunk bed. Common baths, one shared kitchen. The dining room was made to be a billiards room and the family room had office cubicles in it for guest use.

When I was there, it was over 50% rented, so this guy seems to be doing pretty well with his rentals.

How should it be addressed within the confines of an assignment? Other than the bunk-beds/cubicles there were no major alterations to the structure or floor plan. These are not units, just rental rooms. Does this shift the use of the property from single or multifamily to a business use, such as a hotel or rooming house?

Since there are multiple rentals, dose the number of rental rooms (greater than 4) become an issue?

This property is located in Chicago, and per the owner the Registration with the City is Pending.

Any advice is welcome!

 

[Restrain]

Stop, call the client, explain what you have found. This can fit the definition of a rooming house and not be eligible for sale on the secondary market.

 

[SteveSpy]

Stop, call the client, explain what you have found. This can fit the definition of a rooming house and not be eligible for sale on the secondary market.

Already did that.... Is there any official guidance on when a SFH becomes a boarding house via AirBNB?

Thx!

 

[J Grant]

Assuming your client wants to proceed...
If the owner stopped renting it as Airbnb tomorrow, it would just be a regular house, correct? Since the owner has not made any structural changes...

Therefore, appraise it as a SFR, comment that present owner is renting rooms for Airbnb but the configuration of house has not been changed. Would a buyer pay more for subject, or could a buyer just buy another house and rent rooms out for airbnb?

This property is located in Chicago, and per the owner the Registration with the City is Pending.

What does that mean, registration with city is pending....registration as what ?

 

[SteveSpy]

Assuming your client wants to proceed...
If the owner stopped renting it as Airbnb tomorrow, it would just be a regular house, correct? Since the owner has not made any structural changes...

Therefore, appraise it as a SFR, comment that present owner is renting rooms for Airbnb but the configuration of house has not been changed. Would a buyer pay more for subject, or could a buyer just buy another house and rent rooms out for airbnb?

This property is located in Chicago, and per the owner the Registration with the City is Pending.

What does that mean, registration with city is pending....registration as what ?

Chicago has a Registration requirement for AirBnB properties. I've been reviewing the ordinance and it looks like our guy may be in violation as there is a maximum number for room rentals allowed...

 

[chad hampton]

I'd appraise it as a single family home if that's what it is. What's typical in the market? Most people know have families and still believe in a single family home. Is a car worth more because the driver decides to use it for uber income? Maybe less due to wear and tear, so not really apples to apples.

 

[J Grant]

Chicago has a Registration requirement for AirBnB properties. I've been reviewing the ordinance and it looks like our guy may be in violation as there is a maximum number for room rentals allowed...

So what? You are not appraising it as an "air bnb" you are appraising it as a house that the owner is renting some rooms out for airbnb income. If owners stopped participation in airbnb tomorrow, what difference would it make to the house value to a buyer? Comment on what you know since you know it, but state it has no bearing on value.

I would research if a number of houses in teh area are being bought with the view or renting for air bnb and analyze if that is the case, because we should do that for area trends, however if that is so,then it is backed intot the prices.

 

[Terrel L. Shields]

BnB is commercial period. @Restrain is spot on.

 

[KONA]

Renting rooms out on a daily basis is business income. Appraise it as a SFR, assuming H & B use is consistent with SFR's.

 

[Terrel L. Shields]

Help:VA Appraisal on Bed & Breakfast

from Fannie Mae

Property Eligibility
Q1. In the list of ineligible properties, boarding houses are identified as an ineligible property type. Is a group home considered to be a boarding house and therefore an ineligible property type?
No. Group homes are residential structures utilized for occupancy by persons with disabilities and are not considered to be boarding houses. Group homes are an eligible property type according to the requirements of the Selling Guide.
Q2. Why are boarding houses and bed and breakfast properties considered to be an ineligible property type?
Fannie Mae purchases and securitizes mortgage loans secured only by properties that are primarily residential in nature. Boarding houses and bed and breakfast properties are not primarily residential in nature and therefore are not eligible.​