Duplex purchase will be half owner occupied/half tenant occupied

[Andee]

Dealing with a purchase that is currently a full duplex with both units being leased. One of the tenants is purchasing the property and the other side will remain as leased. When looking at comps for both the rental portion and the sales comparison, should I consider properties that have only 1 unit rented? My thought process is, only one side will be rented which the GRM will not be the same for a fully leased duplex vs one that has only one side leased. Additionally, if I report rents for a full duplex then it will appear as if the income should be more than what will actually be coming in.

 

[Terrel L. Shields]

No. Value it as if leased. The buyer is using the payment in lieu of rents. So, use market rents for both sides. The occupant does not matter and the GRM will not vary according to the occupancy.

 

[Andee]

Thank you, the last time I did one like this was when I was training and that was 10 years ago, and I couldn't remember the outcome of it.

 

[Zoe]

Thank you, the last time I did one like this was when I was training and that was 10 years ago, and I couldn't remember the outcome of it.

Yeah. Imagine all the sales as if they have a tenant in one side and owner in other side. If your opinion of value is market value, then use market based rents if you are doing fee simple property rights. As far as rental goes, imagine both sides are rented.

Don't let the owner occupied side confuse you on your opinion of market value for the subject. If the owner sold it, they may want to live there still and may not.

On a duplex, I like to inspect both sides. They are not always identical.

 

[sputnam]

Dealing with a purchase that is currently a full duplex with both units being leased. One of the tenants is purchasing the property and the other side will remain as leased. When looking at comps for both the rental portion and the sales comparison, should I consider properties that have only 1 unit rented? My thought process is, only one side will be rented which the GRM will not be the same for a fully leased duplex vs one that has only one side leased. Additionally, if I report rents for a full duplex then it will appear as if the income should be more than what will actually be coming in.

If your assignment is to report an opinion of market value, the GRM approach will be exactly the same. You use market rents... not what the borrower proposes to do with the property. The actual income the borrower is earning is an issue for the Lender... not the appraiser.

If you just use the income from one side... it's Value in Use. You can do that too.. if that's what the Client wants.

 

[Andee]

On a duplex, I like to inspect both sides. They are not always identical.

I let them know when I'm setting the appointment that I need access to both sides, I don't give them a choice. I've done plenty with 2 different sizes and room counts, it has just been a while with one having an owner occupied side and a tenant occupied side.

 

[Zoe]

I let them know when I'm setting the appointment that I need access to both sides, I don't give them a choice. I've done plenty with 2 different sizes and room counts, it has just been a while with one having an owner occupied side and a tenant occupied side.

Yeah and one side is very nice and one side is trashed.

 

[J Grant]

Dealing with a purchase that is currently a full duplex with both units being leased. One of the tenants is purchasing the property and the other side will remain as leased. When looking at comps for both the rental portion and the sales comparison, should I consider properties that have only 1 unit rented? My thought process is, only one side will be rented which the GRM will not be the same for a fully leased duplex vs one that has only one side leased. Additionally, if I report rents for a full duplex then it will appear as if the income should be more than what will actually be coming in.

I don't understand the thinking.

If the subject were vacant, would you only use vacant unit "rents"???? ( which would be zero)

We use market rents, and apply them to total of the units, whether the subject is vacant, fully occupied by tenants, or half occupied, or the buyer intends to live in one of the units.

 

[Zoe]

I don't understand the thinking.

If the subject were vacant, would you only use vacant unit "rents"???? ( which would be zero)

We use market rents, and apply them to total of the units, whether the subject is vacant, fully occupied by tenants, or half occupied, or the buyer intends to live in one of the units.

Depends baby. Are you using leased fee? Leasehold? Fee Simple? What is the value definition?

 

[Zoe]

The owner occupying one unit has little bearing on the appraisal problem depending on property rights and value definition.