Multi-Unit Idea

[ZZGAMAZZ]

I just experienced an epiphany that if I am correct everybody else probably realized it years ago, however regarding a 1 - 4 unit residential income appraisal although I'm not sure if something about the 3.6 multi-unit format got me thinking about this:

An Opinion of Value is based upon the SCA.
An Opinion of Value that is based on the Income Approach can't be obtained from the MLS rental section because units are rented individually rather than as the entire multi-unit property.
Actual rents must/should be used rather than pro forma rents.
Whether the rental income comps can or should be identical to the SCA comps is often debated on the AF.
So.... why not REQUIRE the properties reported in the SCA to be identical to those reported in the IA, which would essentially eliminate the need to report rental comps separately, with the GRM developed in the SCA with the addition of a relatively straightforward, embedded calculation to determine the GRM, even relying on pro forma rents in the absence of actual rents--that if they are accurate would seem to be a better basis of GRM that actual, established rents, or adding a filter that would adjust pro forma rents to actual rents, or vice-versa.

Peers? Yes or No or doesn't matter because it is what it is.
Thanks.

 

[Airstream]

I just experienced an epiphany that if I am correct everybody else probably realized it years ago, however regarding a 1 - 4 unit residential income appraisal although I'm not sure if something about the 3.6 multi-unit format got me thinking about this:

An Opinion of Value is based upon the SCA.
An Opinion of Value that is based on the Income Approach can't be obtained from the MLS rental section because units are rented individually rather than as the entire multi-unit property.
Actual rents must/should be used rather than pro forma rents.
Whether the rental income comps can or should be identical to the SCA comps is often debated on the AF.
So.... why not REQUIRE the properties reported in the SCA to be identical to those reported in the IA, which would essentially eliminate the need to report rental comps separately, with the GRM developed in the SCA with the addition of a relatively straightforward, embedded calculation to determine the GRM, even relying on pro forma rents in the absence of actual rents--that if they are accurate would seem to be a better basis of GRM that actual, established rents, or adding a filter that would adjust pro forma rents to actual rents, or vice-versa.

Peers? Yes or No or doesn't matter because it is what it is.
Thanks.

The new multi-family allows you to use individual units to develop rental rates. That is a big step forward in my opinion.

 

[George Hatch]

I just experienced an epiphany that if I am correct everybody else probably realized it years ago, however regarding a 1 - 4 unit residential income appraisal although I'm not sure if something about the 3.6 multi-unit format got me thinking about this:

An Opinion of Value is based upon the SCA.
An Opinion of Value that is based on the Income Approach can't be obtained from the MLS rental section because units are rented individually rather than as the entire multi-unit property.
Actual rents must/should be used rather than pro forma rents.
Whether the rental income comps can or should be identical to the SCA comps is often debated on the AF.
So.... why not REQUIRE the properties reported in the SCA to be identical to those reported in the IA, which would essentially eliminate the need to report rental comps separately, with the GRM developed in the SCA with the addition of a relatively straightforward, embedded calculation to determine the GRM, even relying on pro forma rents in the absence of actual rents--that if they are accurate would seem to be a better basis of GRM that actual, established rents, or adding a filter that would adjust pro forma rents to actual rents, or vice-versa.

Peers? Yes or No or doesn't matter because it is what it is.
Thanks.

It appears that you don't understand the purpose of a rental survey or what it takes to develop and support a GRM. That's okay, though. You don't need to understand it. You just need to do it.

 

[Sandra Koutsopoulos]

Here, the agents' 'pro forma' rents are so far into wishful thinking, that I don't use them at all. Agents seem to put in an amount that is designed to lure a buyer into imagining a great cash flow position, despite it generally being false. I search for rents actually being paid on similar rentals. With the majority of the pre-foreclosure appraisals I've done with rental income, I have found fake 'pro forma' rents to be a factor, and the sad part is the loans are underwritten with these bogus rents and when the Buyer gets in, and those rents don't happen, they end up in foreclosure. I know we're told that MLS is mainly a sales tool, designed to result in agent commissions, but one needs to evaluate what is written there with a skeptical eye, as reality bites lethally.

 

[George Hatch]

Another problem with using the actual rents from a sales comparable is when those actual rents in these listings are below market. Rent controls apply to the older properties so that makes the pro-forma numbers purely hypothetical. On a rent controlled unit those hypotheticals not only don't exist, they basically can't exist. The buyer can only expect the contract rents.

 

[Dublin ohio]

Here, the agents' 'pro forma' rents are so far into wishful thinking, that I don't use them at all. Agents seem to put in an amount that is designed to lure a buyer into imagining a great cash flow position, despite it generally being false. I search for rents actually being paid on similar rentals. With the majority of the pre-foreclosure appraisals I've done with rental income, I have found fake 'pro forma' rents to be a factor, and the sad part is the loans are underwritten with these bogus rents and when the Buyer gets in, and those rents don't happen, they end up in foreclosure. I know we're told that MLS is mainly a sales tool, designed to result in agent commissions, but one needs to evaluate what is written there with a skeptical eye, as reality bites lethally.

There are typically other source of rental data that you can use to determine actual market rates. MLS is not the only source, at least in my markets

Edit: My MLS also has a rental listing section which shows rental "list" price and also rental date and amount when rented

 

[Sandra Koutsopoulos]

I often use the rents from newly offered-to-rent and then accepted/closed rental income, as that is the most current and isn't complicated with rent control. Those are new/current rents.

 

[ZZGAMAZZ]

Here, the agents' 'pro forma' rents are so far into wishful thinking, that I don't use them at all. Agents seem to put in an amount that is designed to lure a buyer into imagining a great cash flow position, despite it generally being false. I search for rents actually being paid on similar rentals. With the majority of the pre-foreclosure appraisals I've done with rental income, I have found fake 'pro forma' rents to be a factor, and the sad part is the loans are underwritten with these bogus rents and when the Buyer gets in, and those rents don't happen, they end up in foreclosure. I know we're told that MLS is mainly a sales tool, designed to result in agent commissions, but one needs to evaluate what is written there with a skeptical eye, as reality bites lethally.

So a 3 unit with 2 units rented and 1 vacant unit reported on a pro forma that you developed per ur market experience would be acceptable to report as a 3 unit rental comp for the 3 unit subject of an assignment, as data upon which a GRM would be based, if the process applied was disclosed?

 

[ZZGAMAZZ]

Here, the agents' 'pro forma' rents are so far into wishful thinking, that I don't use them at all. Agents seem to put in an amount that is designed to lure a buyer into imagining a great cash flow position, despite it generally being false. I search for rents actually being paid on similar rentals. With the majority of the pre-foreclosure appraisals I've done with rental income, I have found fake 'pro forma' rents to be a factor, and the sad part is the loans are underwritten with these bogus rents and when the Buyer gets in, and those rents don't happen, they end up in foreclosure. I know we're told that MLS is mainly a sales tool, designed to result in agent commissions, but one needs to evaluate what is written there with a skeptical eye, as reality bites lethally.

I should have clatified that the pro forma I asked about must be accurate.

 

[Dublin ohio]

I should have clatified that the pro forma I asked about must be accurate.

??????