Appraising Single-family Rental Portfolios

[Gobears81]

In several of my markets, we've seen a "de-conversion" trend where an investor comes in an buys ALL of the units in an existing condo development in order to "de-convert" and use the building as a traditional apartment. I'm curious if people think a bulk sale analysis or a discounted sell out analysis would be necessary to keep the state off my back?

Seems like it would be a highest and best use issue, and I doubt that a discounted sellout analysis would even be appropriate. As shoddy as other parts of our state government may be, I have no doubt that those working in the real estate division of IDFPR would have the insight to understand that.

I have also analyzed multiple groups of condo sales as a multi-family project in the past. Though, it sounds like the OP's case might not be as relevant in analyzing as a MF project, due to the locations being scattered.

 

[Howard Klahr]

I'm curious if people think a bulk sale analysis or a discounted sell out analysis would be necessary to keep the state off my back?

Hey PL,
I doubt that any method or technique would keep anyone off your back. Lol

 

[BRCJR]

For lending purposes the discounting applies &state board would be involved if you failed to do it. USPAP is explicit that you are required to do this and be familiar with regulations involving your client even if they are ignorant of the law. Saw it many times, lender not wanting to pay. One redo was a CR using one sample report x 42 properties. Examiners caught it and I redid the whole remaining project

That would be relative to a subdivision. These, referenced, are spread out over multiple locations.

 

[Michael S]

I've got an annual appraisal I do for a development of 150 single-family homes in a subdivision that operates like an apartment complex. It's a former off-base military housing project. The first time I did it I looked at the sell vs. rent scenario in my highest and best use analysis but quickly decided that in a market of about 15,000 with only a couple hundred home sales a year at best, 150 additional houses on the market were going to take a while to sell off. That and the value of a fair quality house in a small market was going to be less to an owner/user than as part of a group to an investor. In the end I've compared it to other similar projects around the country, usually a group of duplexes built in a small development of 50-100 units. It helps that a sister property to my subject in the next closest city to the base sold just before I did the second annual appraisal so I had a perfect comp - plus confirmation that the H&BU was renting versus a sell-off scenario. I've yet to find another good sale comparable of a large group of SFR in one location operating like an apartment. It's always duplexes or 4-plexes.

 

[alex gilbert]

The primary tests we use in deciding if a bulk value is necessary for multiple SFRs are: Prior acquisition - were the properties acquired in bulk, or assembled over time? Absorption - can the portfolio be dissolved within a 12 month time frame? Physical proximity - are the properties located close together, or are they separated over a distance? Another decision isn't really for the appraiser, but for the client, assuming a lending scenario. Do they wish to underwrite on the aggregate retail value or income? Some loans on these pools are structured in such a way that an income analysis based on the NOI is a necessary component in the underwriting.