Lending team wants to know if H&B use is residential or not

[Tim The Enchanter]

I told them previously I would want to see contractor estimates for the work if I was going ahead.
Guess I need to ask about that again, if they are going ahead. So I can see if it is worth fixing. Which seems doubtful.
Maybe I am over thinking. Will think on it and not reply until tomorrow.

 

[George Hatch]

I'm not saying price per SF should work. It just doesn't seem logical that price per unit is what always works.

If you can have four 1- bedroom 700 SF units then would that lot be worth the same as a lot you can have four 2-bedroom 1000 SF units?

If what you're asking is whether there's an adjustment to apply because the slightly larger parcel allows slightly larger units, the answer is sure. But that's an adjustment to apply to the price/sf or price/unit. It doesn't change the point that the unit of comparison is still the price/unit.

Put it this way: if you have 2 adjacent parcels with the same RD-1.5 zoning the OP is referring to, that zoning allows 1 unit/1500sf of lot area. If parcel A is 4500sf and parcel B is 5500 sf they both have basically the same development potential - you can get 3 units on each. Meaning, in most cases the 5500sf parcel be not be worth even 10% more, let alone 18% or 20%. That's where using a price/sf would get you to a different value conclusion. Basically, you can only get whole units out of it, not partials. There is effectively no such thing as a 3.5 units = value scenario, if you know what I mean.

As with anything else, you would always consider the alternatives anyway because it doesn't pay to operate off a blind assumption, but IRL (and in our region) the sales will virtually always work out that way.

 

[George Hatch]

I'm valuing a 5 unit multi-family property right now. My comps include sales with a different unit mix than I have (a mix of 1bd+studios). The unit of comparison I'm using - which does work for these properties - is price/rentable room. A 1bd unit has 3 rentable rooms, and (in this market) will tend to generate about 75% of the rent of a 2bd unit which has 4 rentable rooms. For these properties, price/unit only works when all your comps have the same unit mix, which is almost never.

 

[Joe Flacco]

I see what you are saying. I guess it could be like that if the development standards specify lot area per unit. The zoning I deal with specify things like maximum floor area ratio, height, lot occupancy, and setback requirements. And then can build whatever fits within that.

 

[Tim The Enchanter]

I see what you are saying. I guess it could be like that if the development standards specify lot area per unit. The zoning I deal with specify things like maximum floor area ratio, height, lot occupancy, and setback requirements. And then can build whatever fits within that.

They have all that kind of stuff too.

 

[gregb]

I'm valuing a 5 unit multi-family property right now. My comps include sales with a different unit mix than I have (a mix of 1bd+studios). The unit of comparison I'm using - which does work for these properties - is price/rentable room. A 1bd unit has 3 rentable rooms, and (in this market) will tend to generate about 75% of the rent of a 2bd unit which has 4 rentable rooms. For these properties, price/unit only works when all your comps have the same unit mix, which is almost never.

Have seen studios given different room counts of 1-0-1 or 2-0-1 and in other situations dining rooms disregarded in the room count, as in 4-2-1 or is it 5-2-1.

 

[George Hatch]

I generally treat studios as having 2.5 or 2.75 rooms based on their income potential when compared to 1bd and 2bd. I adjust the units of comparison by income ratio, not by trying to develop line item adjustments. It takes a good rental survey and reliable income data to do that, though.

And then the rent control ordinances - where present - add another wrinkle.

 

[Tim The Enchanter]

Have seen studios given different room counts of 1-0-1 or 2-0-1 and in other situations dining rooms disregarded in the room count, as in 4-2-1 or is it 5-2-1.

Total room count sometimes seems subjective to me. Or subject to interpretation.
Is it a dining room or area? How big does it have to be to be a bedroom.

 

[Tim The Enchanter]

I adjust the units of comparison by income ratio,

Is income not the bottom line for an investor. Of course.

 

[Joe Flacco]

Unless living and dining rooms are separate and at least partially divided rooms, it is just one big living / dining room.