How to appraise a "boarding house"

[valuefinder]

PRO HELP! How to appraise a "boarding house"

Hi,
I have a client that would like me to appraise a property being used as a sort of boarding house. The property is a large Victorian home near the campus of a local State University. It is zoned for "clubs and fraternal organizations" so the use could be legal. Assuming it is, can it be appraised as a SFR (I am an AL appraiser) The client provided an old appraisal that was done as a SFR when he bought it but the appraisal looks very shoddy and careless and possibly a case for fraud. Not the way I want to handle it. The property is rented to several (about 10) single room occupants. I will clarify with the bank about what they want and disclose everything... but from the appraisal side... What category of property is this? Is it an investment SFR or should it be thought of as an apartment building? I want to have an answer for my client as to weather I can even do it or not. Then I will worry about comps and adjustments. Any help is appreciated.

 

[Midwest Guy]

Its current use is not SFR, this is a complex assignment! I would consult a Cert General in your area!

 

[George W Dodd]

HBU first. What can the property legally be used for? Just cause somebody rents it out to multiple people doesn't make it legal.

 

[Smokey Bear]

Its current use is not SFR, this is a complex assignment! I would consult a Cert General in your area!

HUH???? Since when is a property required to be SFR to not be complex? I've seen parents buy a house for their student child to live in and rent out all the other rooms. That doesn't make it commercial, it just means you have a lot of roommates.

What's the highest and best use? What would it be if vacant? Are there any building alterations that would change it from SFR to something else? Don't focus so much on "current use" down to how many people live there and whether they're related - that's none of your business, and in some states it's illegal to discriminate on familial status of co-inhabitors. You're appraising what the house would sell for, that presumes the current occupants move out, unless they're on a lease.

 

[Couch Potato]

Good place to start.

HUH???? Since when is a property required to be SFR to not be complex? I've seen parents buy a house for their student child to live in and rent out all the other rooms. That doesn't make it commercial, it just means you have a lot of roommates.

What's the highest and best use? What would it be if vacant? Are there any building alterations that would change it from SFR to something else? Don't focus so much on "current use" down to how many people live there and whether they're related - that's none of your business, and in some states it's illegal to discriminate on familial status of co-inhabitors. You're appraising what the house would sell for, that presumes the current occupants move out, unless they're on a lease.

Nobody said it did; however, this particular property is very much a complex assignment. A good clue is the title of the thread. There is every reason to believe the occupants are on a lease. Current use is always relevant to an appraisal to some extent. If the HBU is claimed to be SFR, but that is not the current use, the appraiser must be prepared to answer the question of "why it is not being used in that way?"

The forum is a great place to start, but anytime one needs help understanding how to appraise a particular property, the best practice is to also get help from a more experienced appraiser. Everyone should have at least one local appraiser with whom they can consult.

 

[PropertyEconomics]

Here we go with lots telling you that you cant do it because its complex ... I think you should put it on a small residential income form and see if you can find comparables very similar in use with similar rents. I personally dont think its all that complex of an assignment ... its a college town correct .... if you look .. you will find many properties used in this manner ... its not unique to your college town ... they were everywhere when I went to school and that was .... well a while ago ....
Think if it as a small residential income property and I bet you can do a very good job. You might need a cert residential to help you but I dont think you need a cert gen .... its just like most other small residential income properties. .... IMHO which often isnt so humble .... HAHAHAHA

 

[George W Dodd]

I don't think a rooming house qualifies as a SRIP. BBU will tell you what the legal uses of the property are and that will narrow down your scope. Changes are it's SFR, if not then cross that bridge when you get to it.

 

[PropertyEconomics]

Mr Dodd .. we all have our differences of opinion. Its residential, its small and it produces income ... I think it can be put on the SRI form and detailed quite nicely ... IF ... you have good comparable sales.
He stated the zoning allows the use ...

 

[George W Dodd]

I read it as the use "could be legal" which is why I suggested the HBU. That would narrow down the SOW. Generally speaking the SRIP form is designed for multiple units whereas he stated "a boarding house" which usually describes a dwelling that does not have separate facilities for each "unit". Also, the HBU and SOW would determine if the property is something the client can and would lend on, if that is the intended use.
I am not necessarily saying that the SRIP couldn't be used, because there isn't enough info in the post to determine that; however a narrative report format would eliminate potential of misleading the reader of the report.

 

[valuefinder]

More info.

I will try to find out the situation with the leases. I should mention that the place has 10 bedrooms, 5 baths, 2 kitchens, and 1 living room. The prior appraisal (when he purchased the property) used very nice large homes set up as regular SFR's (3 or 4 beds and 2 or 3 baths) for comps. The value of those large nice homes was A LOT more than what I am finding for comps that seem like they are being similarly used (ie. comp MLS note say "Single room rentals, Great income!") So if I go the SFR route it seems like there would be some functional obsolescence and value issues.

Thanks for all the input... keep it coming!