Ever Done A Frat House?

[Kathy in FL]

I got an order on a fraternity house in a nearby college town. It's a purchase and the buyer is going to turn it into student housing. (No big conversion needed there.) It's 16 units (OK, bedrooms, no kitchen...shared bathrooms). It's multi-family (kindof) but with only one kitchen, it's not really suitable for more than one family.

Thing is, there have been no similar "frat" sales in the last whenever. Not even similar student housing. Just a few (and I mean, A FEW) small apartment buildings. And a few really LARGE complexes. (Subject is 7,000sq.ft.)

Any advice? This is a new one on me. I called the lender to try to bail out, but I think they're going to want me to do it anyway.


Thanks,
Kathy in FL

 

[Mountain Man]

I hope you quoted enough. Got any other nearby college towns you might luck up on a sale? I don't know your area that well, but I would think any sales data on a similar small town college dorm would be better than a guess with duplex or apartment sales.

Maybe you could talk the client into a limited-restricted using only the cost approach?

 

[Rich Hahn]

16 units?
Are you a CG?
1-4 max for licensed.

Easy out...

Good Luck

 

[George Hatch]

I've done some frat houses and a sorority house, too. (I made sure my wife was with me every step of the way on that one!!) I would say the common occupancy is somewhat similar to that of a group home, board and care, a youth hostel, and even a single room occupancy hotel. Not the same, though. A couple things to watch for:

Occupancy is not run on a 12-month basis, at least not for most of them.

The income and expenses probably will include non-realty items like dues payable to a national charter organization, 'adult' supervision and other services, food and household supplies, etc. Separating out the income attributable to the realty can be a real hassle.

Many frats rely partially on endowments funded by alumni, which subsidize the rents and should be included with then income, even though they aren't rents.

Charters can and do get revoked, in which case there is no longer a frat for the house

The number of 'typical' buyers for an on-campus frat house can be extremely limited; and the effective demand can be even more limited because there may be CC&Rs or a deed restriction that prohibit purchase by other than a frat or other student or faculty group. It's not like such a dwelling can be listed in the MLS and simply sold to the highest bidder.

Rent comparisons using rents from the competing dorms is not altogether unreasonable, although rents from the other frats and sororities are actually going to be more applicable. Most of the universities have a greek council that might be able to help you with that information if they can be convinced you need it.

Some frat houses are built like overgrown houses, some are converted apartment buildings. Some look more like a dormitory. Most of them will have a high ratio of bath facilities per bed, but only the one common kitchen, dining and living zone. You'll have to be careful in choosing your comps.


Bottom line here is that a frat house or sorority house is not just another big house, suitable for appraisal on a 1004 form and using other big houses in the area for comps. I honestly wouldn't recommend a residential appraiser attempt something like this unless they're prepared to deal with all of the above and possibly more. If I were you, I'd try to get out of it. The only reason I got involved with the ones I ended up doing is because those clients wouldn't take 'no' for an answer.


George Hatch

 

[Tim The Enchanter]

I lived in a frat house for 1 school year in College.
Sophmore year, then I changed schools.
A fun and interesting experience.

For a more informative answer, read George's post above again.
Where's that :Bow: smilie, anyway?
I have nothing to add to that answer.

 

[Kathy in FL]

Perhaps I didn't clarify. I am certified general. (I am the very model of a model certified general... )

However, I am a very small town rural certified general. So, I have to do a little of everything, because I'm IT. Motels, churches, marinas, sawmills, and now, a frat house. I tried to bail on it...added on to my usual fee by a hefty amount...BUT the lender says he'd be happy with a limited cost approach...just, please...in less than two weeks because they were supposed to close yesterday and only had 15 days to get financing. (Which also expired yesterday.)

Sigh...thanks for all of your help. I'll try to come up with something.

Makin' sumthin' wit' nuthin'...
Kathy in FL

 

[Bob Ipock]

Ever Done A Frat House?

Not exactly a question I would want my wife or daughter to answer in the afirmative!

 

[Kathy in FL]

:rofl:

Hey, I'm a married, boring old appraiser now...but in my day, I might have tried!!


Kathy

 

[Rich Hahn]

I (tried, not for long) to review a 1004 on a frat house, it was OWNER OCC.?!
I told the investor this is BS aint going there. Wish I had kept that apriasal..

 

[George Hatch]

Kathy,

Seriously, I'd look for a combination of sales including group homes and university related housing from other college towns in your region. Possibly a women's shelter or religious dorm? This may be one instance where not physically inspecting a particular comp because of the distance would not be too unreasonable if you can otherwise get some decent data on it.

I'd also take a stab at the income approach; you can at least determine what the rents attributable to the realty are if you look hard enough at the operating income statement and competing university housing in the area. You'll probably also be able to extract some rates of return or other income indicators from your sales data. Your predominant unit of comparison may end up being price per bed, or price/SqFt.

Obviously, the quantity and quality of data for something like this is never going to come close to what you'd have available when appraising a house. However, it sounds like you already know that drill. Just do what you can do with the available data and then move on.


George Hatch