Operating Income Expense Statements (216)

[Wayne Henry]

I have been debating this with myself for some time now. I have completed multi family forms in the past but very rarely do I come across the situation where the owner lives in one of the units. On the OES form do you fill out the form as if one unit is rented and one is not or both units are rented, using the market rent as a current rent indicator. I usually do the latter and have not come into any problems. I usually comment that these are projections if both units are rented which is currently not the case.

Just wanted to hear your comments on this situation.

Thanks in advance.

 

[Bill Rose]

I do it as is, unless the owner's moving out before escrow closes.

 

[Ben Vukicevich SRA]

Wayne,

It depends on your appraisal problem. You should inquire into the Intended Use of the report. If for a mortgage, call the LO and find out if the subject is to be an owner-occupied unit. If so, the 216 form instructions state: "Do not include income for owner -occupied units" and "Do not include expenses for owner-occupied units."

I did one recently that was not owner-occupied but the owner did not need the rental income of the subject to qualify for the loan, thus the lender did not want to pay for the 216.

Ben

 

[Otis Key]

Wayne - if you look at the forms there is a spot for current rent and market rent. If the software is working correctly it will more than likely utilize market rent for the analysis and your problem is solved. You want to establish the market rent to justify the current rent or a reason that it should be raised or lowered in a short time span.

At that point, your problem is solved.

 

[Beth Ryder]

Wayne,

I was going to type in this exact same question!! I have done these for years also but there is still differences among different appraisers so I was wondering what the national concensus is. The OIS does say "not to include income or expenses for owner-occ units" I always ask the loan officer if the buyer is going to be occupying one of the units and which one so I know which rental income to exclude. My question is on page 2 in the replacement reserves section. If we aren't counting the expenses for the owner-occ unit, then do we also ignore the replacement reserves for the that unit? So in essence, we would only be calculating the R.R. for the tenant-occ unit? Any have the solution?

Beth

 

[Ben Vukicevich SRA]

Beth

You have to put on a different thinking cap for the OIS. It's not your typical Income and Expense Statement for an income producing property.

It only helps to qualify the borrower. If one unit is owner-occupied, the income, expenses and reserves are not included for the owner-occupied unit.

Ben

 

[Beth Ryder]

Thanks, Ben! You affirmed my thoughts...nice to have backup.

Beth

 

[Beth Ryder]

Here's another question for you....FHA multi-family using the 1004 URAR form.....Do you do the income approach even though you are not using one of the rental incomes for the owner-occ unit? You need to fill out the market rent but seems to me it is only useful for investment properties where you utilize ALL rental incomes??? If you leave out the owner-occ rental income, the income approach will be skewed and out of line with the comparables, no?
Beth

 

[Ben Vukicevich SRA]

Beth

For FHA multi's on the URAR, you don't need an Income Approach for a 2 unit according to their guidelines.

They have a "required" separate GRM form to utilize for 3-4 unit multi's on the URAR.

Ben

 

[Mike Boyd]

My thinking is that the lender wants this info in case they have to foreclose and become the owner. In that case, they might want to know what their holding costs are going to be. Actually, I think you can do it either way. I doubt if many underwriters even look at the OIS.

Mike