Appraising In An Airbnb World

[DTB]

Man that sounds more like a rooming house to me now. Doesn't seem to fit the vacation rental model at all.

Personally, I would tread very lightly. Good luck

I reread your OP, who is paying $50 night in Garfield Park?

https://www.trulia.com/real_estate/East_Garfield_Park-Chicago/2901/crime/

http://www.chicagotribune.com/news/...-park-highest-murder-rate-20140808-story.html

 

[Overimprovement]

What stops any owner from renting out a room(s) in their own home at any time? That fact in and of itself does not make a home anything other than SFR. I lived in High Point, NC for awhile, and there is a huge furniture market there twice a year, and hundreds of people rent their homes out for 2-4 weeks a year because of this. Their use of the home does not change its fundamental characteristics as a primary dwelling.

Now, assuming local zoning and ordinances permit it, the HBU can be an issue. If I have a vacation home that I can rent out for far more than what it might otherwise be worth, then the HBU may actually not be simple SFR. This is even more true if little or no changes are necessary to a home to accomplish this.

For anyone that lives in a college town, they know that there is a student 'ghetto' typically very close to campus where older homes have been converted to similar setups, except the renters can be more long term in nature. One can argue those have turned into multi-unit dwellings, even if the owner resides in the house year-round and does not cooking.

Perhaps it comes down to this--if this home went on the market tomorrow, who would pay more for it, an investor, or a primary dwelling owner? If the former, then perhaps this is a commercial assignment. Else, I agree with others--just appraise as SFR.

 

[Terrel L. Shields]

Else, I agree with others--just appraise as SFR

Since Fannie Mae won't fund it, nor VA, don't you think you run a serious liability risk if not an in house loan?

Neither what it is worth, what its HBU is, nor its value (identical to SFR or not) is the issue. You must conform to the rules of the game. And what I quoted applies to two of the major lenders (VA, FNMA) and without looking I am confident applies to FHA, too. Most B & B operations advertise and most rent more than 25% of their space at one time or the other.

 

[Overimprovement]

Since Fannie Mae won't fund it, nor VA, don't you think you run a serious liability risk if not an in house loan?

Neither what it is worth, what its HBU is, nor its value (identical to SFR or not) is the issue. You must conform to the rules of the game. And what I quoted applies to two of the major lenders (VA, FNMA) and without looking I am confident applies to FHA, too. Most B & B operations advertise and most rent more than 25% of their space at one time or the other.

I guess I disagree with you that sporadically renting out a bedroom in your home classifies a home as a full time boarding house.

Is there any definition on what qualifies as a boarding house?

 

[SteveSpy]

I reread your OP, who is paying $50 night in Garfield Park?

https://www.trulia.com/real_estate/East_Garfield_Park-Chicago/2901/crime/

http://www.chicagotribune.com/news/...-park-highest-murder-rate-20140808-story.html

Not me. That $50 may be surge pricing during Riot Fest or something.

To be fair this guy makes a pretty honest assessment of the area in his listings. Still there are some reviews stressing how 'unsafe' they felt. One guy left an angry review after booking the 'bunkbeds' for his parents when they came to visit from out of the country. Nice Son! There's a sit-com episode in there somewhere.

Like I said, this goofy boarding house use arrangement is but one issue with the assignment. I am more interested in the academic side of it....

 

[SteveSpy]

I guess I disagree with you that sporadically renting out a bedroom in your home classifies a home as a full time boarding house.

Is there any definition on what qualifies as a boarding house?

That's what I am looking for. I see some references to the number of rented rooms with 4 or 5 being the most common thresholds.

Some municipalities had other requirements like Beds needed to be provided, # of rooms rented, house rules, and collection of rents.

 

[Terrel L. Shields]

what qualifies as a boarding house

I guess you missed what I posted from Fannie Mae, right?

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.
​

I don' t see why that isn't plain. If they advertise as a B & B, rent rooms, etc., it is commercial rented 1 day a month or 30. Ppl rent out as B & B so they can deduct home expenses...an empty motel is still a motel.

The threshold is 25% of the space.

FHA
It will not approve an FHA mortgage for hotels, boarding houses or tourist dwellings. Yo

 

[SteveSpy]

I guess you missed what I posted from Fannie Mae, right?

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.
​

I don' t see why that isn't plain. If they advertise as a B & B, rent rooms, etc., it is commercial rented 1 day a month or 30. Ppl rent out as B & B so they can deduct home expenses...an empty motel is still a motel.

The threshold is 25% of the space.

FHA
It will not approve an FHA mortgage for hotels, boarding houses or tourist dwellings. Yo

I saw and agree... the confusing part is that FNMA now allows the income form AIrBnB rentals as income to qualify for loans. Is that 25% printed in the Selling Guide? I saw the FAQ you quoted, but did not note the threshold number.

In a nod to acknowledge the gig economy, Fannie Mae has approved a pilot program to allow income from short-term rentals through Airbnb to help homeowners qualify for a refinance.

https://www.washingtonpost.com/news...cations/?noredirect=on&utm_term=.4c8235c9cc85

 

[Meandering]

Were you notified you and your subject property and your client, were part of the pilot program?

Or are you just signing everyone up to be in it?

If everyone is in a pilot program, who is providing the "control" data for the study?

.

.

 

[J Grant]

Since Fannie Mae won't fund it, nor VA, don't you think you run a serious liability risk if not an in house loan?

Neither what it is worth, what its HBU is, nor its value (identical to SFR or not) is the issue. You must conform to the rules of the game. And what I quoted applies to two of the major lenders (VA, FNMA) and without looking I am confident applies to FHA, too. Most B & B operations advertise and most rent more than 25% of their space at one time or the other.

Fannie accepts airbnb income as a borrower qualifier, ( they are in a bromance with Quicken/Amrock )advancing higher risk lending practices, with Fannie doing their part by endorsing riskier appraisal practices to get funded. (including waiving appraisals)

We need to separate qualifying borrowers on lender side, from appraiser's task which is to value properties. Lenders are accepting air bnb as part of a borrower's income . Fine, that's their business. But to date there is no category for an "airbnb property" category. There are single family homes or condos that the owners choose to rent out, either by the room or by the entire property. B n B have their own distinct features to qualify and are not considered the same as a SFR or condo whose owner rents it as an air bnb. It's like comparing a taxi to a private car whose owner happens to use it for UBER rides. If a SFR has been so modified it resembles a rooming house or bnb, it is no longer residential but usually an airbnb is same as other residential properties of its type, just that the owners decided to make $ off it with airbnb . Disclose it of course.

A property used for heavy air bnb use might have more wear or tear which might affect condition. Then consider location, if air bnb can command a high $ rate, it might make properties more valuable in certain areas , such as vacation or urban, but add nothing to value in suburban areas. Go online and look at the properties being rented for airbnb in an area you are appraising. Some rates are so shockingly low one wonders why the owners bother. But if they are near a beach or trendy downtown area, they could charge far higher or in certain seasons. Which does not matter in terms of income to us, but it would be reflected in demand/ prices of similar properties.