Short-term rentals

[Terrel L. Shields]

All the STR comps do is give the lender predictable income generation for the borrower to make the payments.

Well... do you think a CR needs to be doing income analysis for lenders? Not my job.

 

[sputnam]

The role of short term rental income in an appraisal depends. What is the type of value for the assignment? What is the property to be appraised? Real property only? Going concern? If it's market value, what is the highest and best use of the property? I'm told that many lenders want to see the income to help in qualifying the borrower...not as support for the value.

 

[Terrel L. Shields]

I'm told that many lenders want to see the income to help in qualifying the borrower...not as support for the value.

Again, is that your scope of business? I mean they can ask me to run title, but I am not an abstractor nor licensed as one. They can ask me to estimate repairs - but what are our limits there? How do you "support" those costs? Do you engage a contractor to estimate them? Use a repair book? I doubt it. My own office is the only one where I have seen a repair and reconstruction cost book. Appraisers pull that number from the air.

Just because I can analyze the income of a STR, does not mean I am going to without compensation and a cert general license. And, again, STR are not valid ways to measure real estate value. One can see the impact of STR on value in the sales. You don't need to analyze STR to value a property, and that's what they are paying you (often poorly as it is) to do.

 

[J Grant]

The role of short term rental income in an appraisal depends. What is the type of value for the assignment? What is the property to be appraised? Real property only? Going concern? If it's market value, what is the highest and best use of the property? I'm told that many lenders want to see the income to help in qualifying the borrower...not as support for the value.

I have never had a lender ask me that. Income qualification for a borrower is a lender issue, not an appraisal issue.

I assume the lender has their own way of analyzing or UW checking the income for a borrower qualification. Normally, a borrower when they apply for a loan enters their different income streams, and UW verifies them. Airbnb and similar STR management and booking services generate receipts and income statements for borrowers, and I assume a borrower provides that to the lender /and or tax returns with the income from the STR .

The appraisal is about valuing the property, and if, for a Res mortgage, there are guidelines or rules from the lender /client regarding which rents are used, then the appraiser has to abide by that. I always write in my report that per assignment conditions, LTR are used, and STR were not used, and if STR used it would likely generate a different or higher market rent estimate.

A number of my LTR estimates recently show a negative cash flow. IDK how a lender reconciles that with the borrower's stated income from STR, but that I s not my problem.

 

[mp2277]

Well... do you think a CR needs to be doing income analysis for lenders? Not my job.

Wait.... we're you previously arguing for LTR comps over STR? Can't have it both ways

 

[Carnivore]

So this thread is zooming off into some analysis that is not the intent of FNMA. In the selling guide in regards to income of a STR does not involve the res appraiser or a CG. This only involves the UW and the borrower. The Borrower is to provide the federal ax returns as proof of income and expenses.

It gets really weird over at face book appraiser forum. So then the AMC's realize they can get mo money and tell gullible res appraisers they can use the 1007 long term rental form. No thats not what FNMA wants.

so it's ok to spin off into going concern, business appraisal. interesting on this forum

Here is the FNMA link about str One item is the res appraisers responsibility for the FNMA 1004. That is to determine if the STR is legally permissiable

You can read it all at the link below

Short Term Rentals | Fannie Mae Multifamily Guide

Requirements You must ensure that:

mfguide.fanniemae.com

Oh, ya I forgot. GH has it right. These owners have three sets of books. 1. Their personal set which is true 2. Set for any buyer which is a lie and a set for the IRS which is another lie.

 

[sputnam]

Again, is that your scope of business? I mean they can ask me to run title, but I am not an abstractor nor licensed as one. They can ask me to estimate repairs - but what are our limits there? How do you "support" those costs? Do you engage a contractor to estimate them? Use a repair book? I doubt it. My own office is the only one where I have seen a repair and reconstruction cost book. Appraisers pull that number from the air.

Just because I can analyze the income of a STR, does not mean I am going to without compensation and a cert general license. And, again, STR are not valid ways to measure real estate value. One can see the impact of STR on value in the sales. You don't need to analyze STR to value a property, and that's what they are paying you (often poorly as it is) to do.

You are the appraiser. You decide what you are willing to do. And that is a business decision. If you don't want to go there, decline the assignment. No one has said that you HAVE to do it.... but, if the Client requires it AND you accept the assignment... then, you have to do it.

 

[J Grant]

So this thread is zooming off into some analysis that is not the intent of FNMA. In the selling guide in regards to income of a STR does not involve the res appraiser or a CG. This only involves the UW and the borrower. The Borrower is to provide the federal ax returns as proof of income and expenses.

It gets really weird over at face book appraiser forum. So then the AMC's realize they can get mo money and tell gullible res appraisers they can use the 1007 long term rental form. No thats not what FNMA wants.

so it's ok to spin off into going concern, business appraisal. interesting on this forum

Here is the FNMA link about str One item is the res appraisers responsibility for the FNMA 1004. That is to determine if the STR is legally permissiable

You can read it all at the link below

Short Term Rentals | Fannie Mae Multifamily Guide

Requirements You must ensure that:

mfguide.fanniemae.com

Oh, ya I forgot. GH has it right. These owners have three sets of books. 1. Their personal set which is true 2. Set for any buyer which is a lie and a set for the IRS which is another lie.

That link looks like it might be for the lender wrt STR income qualification They do allow income from STR for borrower qualification

Fannie has guidelines for lenders (income for the borrower ) and a different set of guidelines for appraisals (property) - where they ask for LTR month-to-month or annual leases for res properties that are rented or are res income properties 1-4 units.

It is not our concern if borrowers keep 3 sets of books or lie about their income to the lender. We use market rents regardless of what the tell us the unit is rented for.

 

[Terrel L. Shields]

You are the appraiser. You decide what you are willing to do. And that is a business decision.

So, I can run title and charge for it and not run afoul of licensing requirements for abstractors? I can do a home inspection and charge for it as part of the appraisal and not run afoul of licensing requirements? Nice to know.

It is not our concern if borrowers keep 3 sets of books or lie about their income to the lender. We use market rents regardless of what the tell us the unit is rented for.

Again, yes, it is not your job, and the lender can do their own income analysis. We are liable for everything we do. Why make for liability for ourselves. Further, analyzing intangible and non-reality items are usually the forte of the certified general appraiser, not the residential appraiser.

 

[Carnivore]

That link was FNMA Selling guide. Yes it's for the lender and the selling guide is also for the appraisers.


have fun and good luck getting any reasonable market rents for an str. Your first challenge is what is reasonable? You gonna call two or three str's and and ask them for their rates? You can google airbnb and get it that way. You gonna ask what meals they provide or don't provide at all. You going to ask what the seasonal rates are?