Stand-Alone 216?

[Siggy]

Hello all,
Been around for a while, reading and learning, and finally have a question that I need help with.

I have a client asking for a 216 (Operating Income Statement) on a rental property. No appraisal, no rent survey, just the 216. I've never had this come up before, but I always just kind of thought that form was supplemental only, and could not be completed by itself. Anyone have any thoughts on this, or know where I could find the answer (without waiting 3 weeks for the OREA to return calls)?

Any help is appreciated,

Thanks, Siggy

 

[Joshua Fookes]

You can assemble an Operating Income Statement, but you are going to need some detailed information about the property before you are able to put it together, including developing your own opinion of the subject's Market Rent. You are going to need to know size of improvements, condition of improvements and fixtures, etc.

But you CAN do it.

Josh

 

[Mztk1]

I don't see any reason you can't to do it without estimating market rent. If the client gives you a contract and you state you are basing it off actual rent and under "Market Rent" put "Not developed" and then explain it in the comments section, I don't see a problem. But you do need to know a bit about the property so hopefully you have very good public records, a copy of the lease, the phone number to interview the owner and tenant about about who pays for what and what the condition is like, the age of the equipment, etc., and I think you are good.

When it comes to the remaining life of the equipment, if you cannot get a good idea of it, you can simply base the money going into reserves on total economic life of each item and state in your comment that you are assuming an ongoing reserve and therefore base the cash to reserves on total life.

 

[RSW]

If you give any type of market rent you are doing an appraisal. Be very careful, create a workfile, and follow USPAP.

 

[ghrousseau]

I can't see any reason a client would ask for a stand alone 216 unless the original appraiser would not provide one. I would be very suspicious of the request.

 

[Siggy]

The original appraiser (who did not do an appriasal on the property in question, but rather on the "new" home; Buyers are keeping the property in question and renting it out) would not do the OIS only. Client approached me, I said I would ask people smarter than me if its compliant to do so.

 

[robert higgins]

I agree with what Josh posted, but push it s little farther. 1) I would want copies of rent agreements, 2) copy of canceled rent receipts for the last 3 months, 3) a detailed account of what is in side the place (appliances), 4) any copies of any and all expenses for the property, and doc all the info you recieved in the report.

 

[Riick]

Bet the place has either never been leased out, or tenants have been there only a month or two.
There is no way I would do this assignment without inspecting the property, and getting copies of leases, etc.

In the end, all you're going to be doing is comparing the reported / purported income
for the subject to the market rents in the area; that's the intent of the assignment.

Is this house that Mr. X owns really capable of bringing in the $3,600/mo income
he tells us he's getting, and using 60% of it as income to cover the new loan,
or is the probable income more like $1,800/mo
That is he question.

 

[Lobo Fan]

I don't see why you couldn't do it. The scope of work will be the key to this one. Be sure to define how the rental income was defined, your sources for the appliances, carpet, roof condition, etc.

 

[TJSum]

The original appraiser (who did not do an appriasal on the property in question, but rather on the "new" home; Buyers are keeping the property in question and renting it out) would not do the OIS only. Client approached me, I said I would ask people smarter than me if its compliant to do so.

Based on your comments, the borrower is still living in the house, and once they move into their new home, they will turn the old house into a rental. The lender is asking you to do a 216 to see if the borrowers qualify for both loans (they need the rental income to swing both deals).
So there is no rental history for the subject.

How then will you obtain the market rent for your 216 without doing a CRS (rental comps)? How will you fill in the subject column on the CRS without better knowledge of the subject.

The assignment can be done, but in order to do it correct, you really should do an interior inspection of the subject, a CRS and then the 216. The task should carry a fee much larger than your typical add on 216.