Rooming House

[KJLhoxtrot]

Has anybody ever appraised a 'Rooming House.' This is a 10-bedroom house, no kitchen and 3 baths. Rooms are rented weekly. Located in a developed urban area. This is not a college town. I'm from the area so I know they exist here. Although there are no comps. The client wants the As-Is value Only. Zoning is legal. HBU appears to be the current use.

Considering doing this on a 1025 form, 1 Unit/10 Bedrooms, with more focus on the income approach and price per bedroom unit of measurement.
However, the 1025 improvements section has a check box for 2-unit, 3-unit, 4-unit or accessory unit.

Any thoughts or advice would be helpful.

 

[BRCJR]

Has anybody ever appraised a 'Rooming House.' This is a 10-bedroom house, no kitchen and 3 baths. Rooms are rented weekly. Located in a developed urban area. This is not a college town. I'm from the area so I know they exist here. Although there are no comps. The client wants the As-Is value Only. Zoning is legal. HBU appears to be the current use.

Considering doing this on a 1025 form, 1 Unit/10 Bedrooms, with more focus on the income approach and price per bedroom unit of measurement.
However, the 1025 improvements section has a check box for 2-unit, 3-unit, 4-unit or accessory unit.

Any thoughts or advice would be helpful.

Does not look like a property that should be reported using a "form", in my opinion.

 

[George Hatch]

"No kitchen" means it is not an SFR and it's not a group home or frat house of any sort. What you are describing is a single room occupancy (SRO). If you are a CR then this property is outside the scope of practice for that level of licensure.

 

[Terrel L. Shields]

HBU? Any issues with the laws regarding occupancy? Fire marshal? My state regulates anything over 8 rental rooms as a motel. HBU might be back into a "house". Form report? I would avoid that and go with a narrative.

 

[sputnam]

Does not look like a property that should be reported using a "form", in my opinion.

"No kitchen" means it is not an SFR and it's not a group home or frat house of any sort. What you are describing is a single room occupancy (SRO). If you are a CR then this property is outside the scope of practice for that level of licensure.

Agree with both. It's a tiny hotel.

 

[J Grant]

Has anybody ever appraised a 'Rooming House.' This is a 10-bedroom house, no kitchen and 3 baths. Rooms are rented weekly. Located in a developed urban area. This is not a college town. I'm from the area so I know they exist here. Although there are no comps. The client wants the As-Is value Only. Zoning is legal. HBU appears to be the current use.

Considering doing this on a 1025 form, 1 Unit/10 Bedrooms, with more focus on the income approach and price per bedroom unit of measurement.
However, the 1025 improvements section has a check box for 2-unit, 3-unit, 4-unit or accessory unit.

Any thoughts or advice would be helpful.

You have posted two other times asking about this same assignment, in the last thread, you said the buyer intended to turn it into a duplex.

Assuming what you say is correct and that the zoning is legal (mixed-use/commercial or hotel/motel- ) As a going concern 10-room SRO, what you propose above might be construed as fraud, or misleading. Because If you are considering a 1025 form, I assume it is because the lender wants some form of URAR form for Fannie/Freddie=for a residential loan program, they do not approve hotel/motel use.

And a property can not be both - it can not be, at one and the same time, a commercial SRO/motel and also be a 2 unit or 3 or 4 unit residential income property ( which would require a kitchen for each unit. )

As others have mentioned, if you appraise it as 10-bedroom rooming house, it is a commercial property and not suitable for a CR license.

 

[Zoe]

Yeah, Sales comp would probably be weak approach. Cost approach would help. Might have to lean on discounted cash flow analysis.

Get at least 2 years of rent rolls and income/expense statements, any property insurance records, etc.

You might could find older sales. Look back 5 years. Maybe even a lower number or higher number of units.

I would say you are looking at a $2,000 to $3,500 job. You many want $4,000.

 

[Tom D]

You are a res cert doing a commecial appraisal on a 1025. If i'm the state i can't wait to fine you to death. If i'm the holder of this, the state will be seeing it soon.
But you are qualified to do do any commerical aspect because you have done some res 2-4. Shoot yourself now, it will be less painful than what happens later.

 

[Zoe]

I would do direct capitalization rate on it instead of discounted cash flow. Build your cap rate if you have to. Apply market rents to it as of effective date and do direct cap estimate on income cap approach. Do a pro forma income and expense statement for 1 year and capitalize the income doing direct cap approach.

With 10 units, you might could require inspection of all 10 units. Would not be a bad idea.

Think about what an engineer would do on 10 units. They would want to inspect all 10 units. The landlord can get you access.

 

[JTip]

Certified Residential = 1-4 family no cap on value.

Hard pass.