Rooming House

[Zoe]

See, my memory is bad but not that bad;

Consumer Financial Protection Bureau - Wikipedia

en.wikipedia.org

Established 2011.

You could determine that all regulatory authorities knew who CFPB is in the appraisal bias hearings.

Ask any regulatory authority if they know who CFPB is?

 

[Zoe]

Ask Congress? Ask American taxpayer?

 

[George Hatch]

There are a couple reasons why this one is more trouble than it's worth.

When compared to a typical 2-4:

• These will typically rent furnished.
• They require *constant* management, usually including an onsite manager
• Tenant disputes, frequent police and paramedic calls
• Daily or twice daily cleaning of the bathrooms and watching the hallways
• Constant tenant churn and each turnover requires cleaning and possibly minor repairs
• Utilities will be master metered which means the tenants have no incentive to turn off a light or a heater or AC unit
• Furnishings will get damaged, bedding needs cleaning, stuff gets stolen
• Finding comparables can be difficult, particularly if there aren't many such properties around to begin with
• The property is more similar to a motel than to a conventional SFR or 2-4.

The list goes on. The expense loads on these are extreme when compared to a 2-4 or 5+ multi-family under conventional occupancy. And if its really being operated as an SRO instead of a group living situation then any attempt at an income approach is going to have to separate the income attributable to the expense/management/profit margins from the realty interests.

It's like Han Solo said: "this ain't like dusting crops, boy." If a CG has never done one of these they will have to gut it out with the learning curve, which almost always means they're going to take a beating on the fee. Probably most appraisers can gut it out if want to put the time/effort into it but having to learn how to work their way through a more detailed income/expense analysis for both the subject and usually also the comps is going to take a lot more time than anyone could charge for. Unless they've got some experience with doing income/expenses at the more detailed level.

Some fees aren't worth earning. Ask me how I know.

 

[J Grant]

There are a couple reasons why this one is more trouble than it's worth.

When compared to a typical 2-4:

• These will typically rent furnished.
• They require *constant* management, usually including an onsite manager
• Tenant disputes, frequent police and paramedic calls
• Daily or twice daily cleaning of the bathrooms and watching the hallways
• Constant tenant churn and each turnover requires cleaning and possibly minor repairs
• Utilities will be master metered which means the tenants have no incentive to turn off a light or a heater or AC unit
• Furnishings will get damaged, bedding needs cleaning, stuff gets stolen
• Finding comparables can be difficult, particularly if there aren't many such properties around to begin with
• The property is more similar to a motel than to a conventional SFR or 2-4.

The list goes on. The expense loads on these are extreme when compared to a 2-4 or 5+ multi-family under conventional occupancy. And if its really being operated as an SRO instead of a group living situation then any attempt at an income approach is going to have to separate the income attributable to the expense/management/profit margins from the realty interests.

It's like Han Solo said: "this ain't like dusting crops, boy." If a CG has never done one of these they will have to gut it out with the learning curve, which almost always means they're going to take a beating on the fee. Probably most appraisers can gut it out if want to put the time/effort into it but having to learn how to work their way through a more detailed income/expense analysis for both the subject and usually also the comps is going to take a lot more time than anyone could charge for. Unless they've got some experience with doing income/expenses at the more detailed level.

Some fees aren't worth earning. Ask me how I know.

Agree with the above

Add that the OP is not a CG; they are a CR, and that they are trying to put what they describe as a 10-room SRO/boarding house on a 2-4 family URAR form. ( they posted two additional queries about this property on the board )

Imo, it is not just about the fee or the learning curve because maybe the OP could figure that out, but about whether their license level allows it and if they are trying to put a commercial property on a 2-4 residential income form, wif that can be misleading.

 

[Zoe]

There are a couple reasons why this one is more trouble than it's worth.

When compared to a typical 2-4:

• These will typically rent furnished.
• They require *constant* management, usually including an onsite manager
• Tenant disputes, frequent police and paramedic calls
• Daily or twice daily cleaning of the bathrooms and watching the hallways
• Constant tenant churn and each turnover requires cleaning and possibly minor repairs
• Utilities will be master metered which means the tenants have no incentive to turn off a light or a heater or AC unit
• Furnishings will get damaged, bedding needs cleaning, stuff gets stolen
• Finding comparables can be difficult, particularly if there aren't many such properties around to begin with
• The property is more similar to a motel than to a conventional SFR or 2-4.

The list goes on. The expense loads on these are extreme when compared to a 2-4 or 5+ multi-family under conventional occupancy. And if its really being operated as an SRO instead of a group living situation then any attempt at an income approach is going to have to separate the income attributable to the expense/management/profit margins from the realty interests.

It's like Han Solo said: "this ain't like dusting crops, boy." If a CG has never done one of these they will have to gut it out with the learning curve, which almost always means they're going to take a beating on the fee. Probably most appraisers can gut it out if want to put the time/effort into it but having to learn how to work their way through a more detailed income/expense analysis for both the subject and usually also the comps is going to take a lot more time than anyone could charge for. Unless they've got some experience with doing income/expenses at the more detailed level.

Some fees aren't worth earning. Ask me how I know.

yeah, as you dig in, it will almost make you put all your weight on direct income cap approach to value based on a 1 year or 2 year pro forma income/expense.

 

[Zoe]

I have not clue what the definition of value is for this client.

If it is leased fee or leasehold on property rights, it changes somewhat. Market value requires property rights, leased fee, lease hold or fee simple or whatever and H&B use analysis.

 

[Zoe]

We have limited info to work with on intended use and user in this assignment. However, I almost certain income cap approach will be necessary for credible assignment results.

 

[George Hatch]

Agree with the above

Add that the OP is not a CG; they are a CR, and that they are trying to put what they describe as a 10-room SRO/boarding house on a 2-4 family URAR form. ( they posted two additional queries about this property on the board )

Imo, it is not just about the fee or the learning curve because maybe the OP could figure that out, but about whether their license level allows it and if they are trying to put a commercial property on a 2-4 residential income form, wif that can be misleading.

I already commented earlier on the scope of practice issue so I didn't bother with repeating it. My point in the above is that regardless of the licensing issue the competency issue itself is a consideration, too. If a CR takes on a commercial property their "appraisers' peers" for that assignment will be the commercial appraisers (with such experience), not other CRs working outside the scope of practice for their license. Also not other CGs who have never worked that niche.

 

[Zoe]

If the property rights being appraised is "fee simple" AND the definition of value is "market value", I would apply market rents vs contract rents. The property rights being appraised are important. They are like glue to the value definition and if H&B use analysis is even required.

MV definition requires H&B use analysis.