Short Term Rental Analysis

[Dan Hake]

Has anyone compiled data for a short term rental, ie daily/weekly for a specific lender request. If so, can you share the process that you used? TY!

 

[Terrel L. Shields]

It does not matter what process you do, you are asking for trouble. Short term rentals include furnishings. So, are you going to value a HOUSE or a mini-HOTEL? That's the difference. And if you don't have a CG, then you best run away from such STR's.

There is an element of Real Estate
There is an element of Personal property (aka FF & E)
There is an element of the cost of Airbnb and VRBO - i.e.- they charge commission and are equivalent to the "Flag" of a hotel.
There is an element of the BEV (Business Enterprise Value)

If you don't know these, then do not use STR income as a basis for anything that is RE only. And don't let an AMC or bank browbeat you over it. And your fee for such should start with no less than 4 figures.

 

[Meandering]

And a funny thing about short term rentals is that the "renters" don't put the garbage out or mop the floors or clean the windows, or replace the toilet paper, so there are additional maintenance and housekeeping expenses that long term rentals don't saddle the landlord with. Those "business" expenses, including advertising, snacks left for the renters and decorations in all the rooms, separate the short term market from the traditional annually leased properties.

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[Tom D]

the 1007 is not made for short term rentals, if that's what your using. and then, is the rent total consistent each month, or the average of 12 months. how about different expenses for different times of the year. and what is the vacancy rate. too many variables of which i would not do a rental valuation on it.

 

[sputnam]

Has anyone compiled data for a short term rental, ie daily/weekly for a specific lender request. If so, can you share the process that you used? TY!

Sure. If you know any appraisers who do appraisals at the beach, they do it on a regular basis. You can annualize the rents and expenses and report it that way. You can, if the Client insists on the 1007, divide everything by 12. It's market rents though.. not how much the subject rents for. It's not, imo, appropriate to use the 1004 or 1007 to report an appraisal of a short term rental property if you appraise it as a going concern.

 

[J Grant]

Why does your client want short term rentals analyzed?

 

[Terrel L. Shields]

If you know any appraisers who do appraisals at the beach, they do it on a regular basis.

And the derived value is the total property value, not the value of the real estate. You are leasing personal property and real estate combined. No bank making a loan under the FDIC rules can co-mingle the two. It is no longer real estate loan but is a business loan.

 

[Carnivore]

FNMA is pretty clear on their guidance to lenders in the attached link. in regards to STR's. You probably noticed that RE Appraisers are not even mentioned.

Gee I wonder why? Well one reason is you as an appraiser probably provided a 1004/1073 report for that property. Which is all they need in event of foreclosure. If they market the REO and that will it will be to the widest range of prospective buyers with exposure time set by them.

Also, no owner is going to turn over their past income tax records to the appraiser. Unless of course the appraiser is an accredited Business appraiser.
retained by the owner. NC does not have a licensed business Appraiser. If they did that appraiser would then be required to comply with Standards Rule 9 & 10. Which would also require them to comply with the Ethics & Competence Rule's.

Very Interesting site because it has pricing

http://stantonparkllc.com/business-valuation/

 

[Elliott]

I'm assuming you are trying to shoehorn this into the 1007. So you have a gross rental, sometimes disclosed, sometimes based on the nightly rate (on season/off season) x the occupancy rate (sometimes estimated sometimes owner provided), less all the expenses associated with the operation of a short term rental (cleaning, maintenance, Vrbo Fees, Local STR tax, upgrading, anything listed to the IRS), then you probably should make an adjustment for the 'personal property' and you divide the net rental income by 12 and plug it into the form. I've never had Fannie or a lender gripe over it, but by all means disclose that the subject property is being used as a short term rental. Hope that helps. Oh, and the monthly rentals used as comparables are 'gross' and do not deduct for insurance and property taxes typically.

 

[Dublin ohio]

Why does your client want short term rentals analyzed?

After many threads concerning HBU. With many saying "use" isn't a factor. It is what the property is. For instance a SFR is a SFR. Do the str "rights" go with the property. For instance in Columbus, Ohio. The "right' to use a SFR as a str has nothing to do with the property per se. When it is sold. The new owner would have to apply for a business license and maintain a separate operating account to operate it as an str and there are other requirements the owner has to meet. Granting of permission to use as a str is not a given.