Operating Income Statement Form 216

[robert hoagland]

Trying to appraise a duplex that has two seperate owners, each of whom live at the subject, typical 1025 stuff. The problem I have is with the Operating Income Statement. Have done a few of these before but this is the first one with each unit occupied by an owner, hence, no rents or income. I have come up with the market rents but in the Annual Income/Expense Projection section under Income it says in parenthesis, (Do not include income for owner-occupied units), same notation in the Expenses column. What gives?

 

[Pamela Crowley (Florida)]

I'm confused.

Is the property a duplex under a single tax record/parcel ID #?

Or, is it 2 single family attached units with 2 separate parcels?

 

[Mike Garrett RAA]

Sure sounds like a "Twin Home", "Half-plex", "Attached town home" not a duplex in the true sense of the word. What does the legal say?

 

[robert hoagland]

Sorry about the confusion. Two individual units, two different addresses, one map/block/lot number and one tax figure, (owners are brothers, each with an undivided one-half interest), one is selling his interest to the other.

 

[Pamela Crowley (Florida)]

Ouch!

OK, the owners live there, one in each side, and the property is a duplex on one deed and one property ID.

I some thoughts flitting through my head on this situation, but so far, I've not had this one come up and would like to see some more experienced responses.

I'm moving this to the General Forum for additional help.

 

[Ghost Rider]

As I see it, you can do it one of 2 ways - Since the property is in process of being transferred, and the second unit will most likely NOT be owner occupied after transfer, use the market rent for the second unit to determine rental income for the property. Make sure you disclose just how you are doing this in the comments on the second page of the OIS......

The other way (I would probably do it the first way myself) is to put the income as zero, and let the expenses and cash flow look like a loss, and let the UW deal with it. Thats the way the property is at the time of inspection.

 

[Ben Vukicevich SRA]

You got bit by FNMA underwriting..which is not as we would like to do things income and expensewise.

Two owners and one selling to the other. You now have to call the LO to see what's up. Will it be owner occupied or will it become an investment property for the new owner?

If one will be owner occupied and the other will be rented follow the FNMA instructions. Use only the income and expenses for the rental unit. .

If it will be non-owner occupied, use the rentals and expenses from both units. Do not add RE taxes or HOA fees to the OIS. They are calculated separately in the buyers ratios.

Basically, you're just doing the OIS to show any additional income to help the buyer qualify for the loan and then taking out the expenses attributable to that income to give the UW a net figure.

Ben

 

[Verne Hebert]

Sound advice.

 

[Pat Butler]

Ben has it right. Remember- this form is primarily for underwriting purposes where the lender is looking at the potential cash flow situation. You could always call them anyway to get clarification. But I think they put that note there to differentiate it from the appraisal whereby you WOULD be including projected estimated rental income for the owner-occupied unit in the income approach.