Let's Talk About Multi-family Properties

[gregb]

When someone constructs a duplex from scratch with the goal of leasing it out, based on the income approach, is its value $0 1 second after the building is completed, but before any renters sign leases?

Well, we would not want to be projecting or predicting MV based on a future, hypothetical event, would we?

 

[Digger88]

I go more with GBA / GLA than bedroom count. Around here the rental data is sketchy and limited. Also what some agent thinks is a bedroom, well.....
But, sales data is usually / hopefully pretty good, so sales comp approach is most useful.

hmmm... i do the other way. br count is king in DC.

 

[TRESinc]

I love the appraiser depends....
For my limited 12 or so years as a staff appraiser....
I don't recall myself or any fellow staff hanging our hats on the income approach for the 2-4 family appraisals....
I'm not saying that I and my fellow staff were trained properly on this....
I'm just saying on 2-4 units I haven't seen it....
But most, if not all, of you seem to be indicating that income approach for a typical buyer of 2-4 units is an investor who would expect the income approach to be given most weight (maybe you didn't say that!!! )

given your earlier post it's no surprise you hold that position

Rightly or wrongly the bank that trained me was of the opinion that the typical buyers of a 2-4 unit did so for a place to live and future appreciation rather than for the potential income stream.....

no one can say that the typical buyer of a 2-4 unit property is ____________. every market and every buyer is different and that statement must be applied using the market data you research by looking at sales of 2-4 unit properties, researching and analyzing rents, talking to agents about sales of 2-4 unit properties... wait, never mind. forgot who i was quoting and how you operate.

 

[Overimprovement]

Well, we would not want to be projecting or predicting MV based on a future, hypothetical event, would we?

Nice one.

Actually in this case, I would say that I am not predicting that there will be many or any renters, but rather observing that historically, and as recently as possible, other similar properties have had an occupancy rate of X, and a typical monthly income of Y. As they say in the market, past results are no guarantee of future performance!

I am never predicting what WILL happen, only making observations on what HAS happened. Like I said, the lender or intended user is the one who makes the prediction about the future.

 

[George Hatch]

Good gravy - some of you need to ease back on the throttle a little. I'd rather have someone ask a technical question on this forum than not ask. None of us were born knowing what we know now - we all had help getting here.

 

[ucbruin]

Am I understanding what appears to be a majority opinion....
If appraisal of a 2-4 unit is for: an investor purchased or an investor refi....
Hang hat on income approach???
That's how most have been trained???

I understand most posters include the "depends" caveat....
Overall....
That's the sentiment???

 

[gregb]

Fannie-

Income Approach to Value
The income approach to value is based on the assumption that market value is related to the market rent or income that a property can be expected to earn. The income approach to value is required in the valuation of two-unit to four-unit properties and may be appropriate in neighborhoods that consist of one-unit properties when there is a substantial rental market. The income approach to value may not be appropriate in areas that consist mostly of owner-occupied properties because adequate rental data does not exist for those areas. However, USPAP requires the appraiser to develop and report the result of any approach to value that is necessary for credible assignment results. If the appraiser believes the income approach is necessary for credible assignment results, then the income approach must be included. Appraisals that rely solely on the income approach as an indicator of market value are not acceptable.

When the income approach to value is used, the appraisal report must include the supporting comparable rental and sales data, and the calculations used to determine the gross rent multiplier. If the appraiser has completed the income approach, the lender must thoroughly review the information provided to confirm that the appraiser’s analysis and comments for the income approach are consistent with comments mentioned elsewhere in the report.

 

[Renee Healion]

You should develop all approaches needed to make a credible opinion.

Quite a few of us never used the word Depends. Well you have lol

 

[ucbruin]

You should develop all approaches needed to make a credible opinion.

Quite a few of us never used the word Depends. Well you have lol

Most posters are seasoned AF members and are savvy enough after years of posting to leave open the wiggle room door...

But you didn't respond to my question regarding the investor buyer/owner....
When you know that the buyer/owner is an investor do you typically hang your hat on the income approach????

 

[Dublin ohio]

I understand most posters include the "depends" caveat....
Overall....
That's the sentiment???

Not sentiment. Reality.