Very short term rental...

[J Grant]

if it's a 2-family, by definition it's not an ADU... I don't think that's ever been in question.

agree !

 

[glenn walker]

Glenn is correct - the topic of the thread is a 2-unit where one side is OO and the other side, airbnb. The comments about SF detached were only presented to show the flaw in Terrel's logic. To Glenn's point, the Fannie section on rental income might be a good resource (Section B3-3.1-08), as it discusses qualifying a borrower's rental income. If, however, the borrower isn't using the income to qualify, it's my understanding that whether it's an airbnb, or a long term rental - doesn't matter.

Regarding the pilot program Glenn mentioned, I think it only applies to primary residence, and for refinance, but that may apply to 2-family where one side is OO. Just not sure about that. Again - best plan is to discuss the situation with your client to ensure that it's an eligible property, and to proceed from there.

The second UNIT can be vacant and have no income and its not an-issue as long as the owners income is sufficient on its own to cover and service the debt to income ratio. The Underwriters get these BNB'S from time to time on both SFR and 2 units. Also the owners yearly rental income has to be substantiated on both the borrowers tax returns and often a P & L is required from a Certified Public Accountant. The truth is on a 2 unit nobody cares because it was designed for one being owner occupied and the other rented and even though the appraiser is required to complete an-income approach the final OMV and the loan is totally based on the sales comparison approach anyway-- JUST DO IT : )

 

[alebrewer]

Imo the ironic part is that while Fannie program now allows a borrower to use airbnb income to qualify for a loan, I doubt fannie accepts the property itself if it is appraised as a hotel like "airbnb use". They still (I bet) want it appraised as a residential use small income property with market rents from annual or typical longer term leases in area. Appraisers should check with lender client but that is my understanding about differentiating between property eligibility vs borrower income eligibility.

How a borrower using a residential rental property for airbnb use affects their homeowner insurance is a borrower insurance issue, not an appraisal issue.

My guess is that the only change to policy is that now, they are allowing borrowers to use documented airbnb income to qualify for DTI purposes. More of an underwriting issue, so not 100% sure about that. Absolutely correct about the insurance vs. appraisal issue.

 

[J Grant]

The second UNIT can be vacant and have no income and its not an-issue as long as the owners income is sufficient on its own to cover and service the debt to income ratio. The Underwriters get these BNB'S from time to time on both SFR and 2 units. Also the owners yearly rental income has to be substantiated on both the borrowers tax returns and often a P & L is required from a Certified Public Accountant. The truth is on a 2 unit nobody cares because it was designed for one being owner occupied and the other rented and even though the appraiser is required to complete an-income approach the final OMV and the loan is totally based on the sales comparison approach anyway-- JUST DO IT : )

As appraisers, the borrowers income is not part of the apprisal ansyslses. You keep mixing that into these posts

The property is our analysis, the income part is about applying market rents for GRM/income stream. A vacant unit was compared to show we don't appraise these to what a unit is being "used for" on eff date, but rather how the market sees rents/uses them ( as res income properties ).If both units were used for storing owners stuff day of inspection, does the property become a storage warehouse? No.

 

[alebrewer]

The truth is on a 2 unit nobody cares because it was designed for one being owner occupied and the other rented

Agree with most of your statement, Glenn. Not sure about this part, though. It was always my understanding that duplexes are treated primarily as investment properties. Nothing to back that opinion up with, though, so certainly not something I'd want to spend a lot of time debating.

 

[J Grant]

My guess is that the only change to policy is that now, they are allowing borrowers to use documented airbnb income to qualify for DTI purposes. More of an underwriting issue, so not 100% sure about that. Absolutely correct about the insurance vs. appraisal issue.

UW a borrower for their income is a separate function than UW the property for approval, correct?

Glenn mixing the two in creates additional confusion- the appraiser appraises the property, we do not appraise the borrower.

 

[alebrewer]

As appraisers, the borrowers income is not part of the apprisal ansyslses. You keep mixing that into these posts

I'm not sure that's what he's saying. I think he's saying that borrower's income might be relevant to underwriting decisions...

 

[alebrewer]

UW a borrower for their income is a separate function than UW the property for approval, correct?

Glenn mixing the two in creates additional confusion- the appraiser appraises the property, we do not appraise the borrower.

you're correct in that underwriting the property is different than underwriting the borrower. I don't think anyone is saying, though, that the borrower's income is relevant to the appraiser's analysis. I think you're looking for straw men, J...

 

[J Grant]

I'm not sure that's what he's saying. I think he's saying that borrower's income might be relevant to underwriting decisions...

Yes, its relevant to UW decisions about the borrower. While you and i figured out it relates to qualifying borrower income as an UW decision, others might think its about the property.

There is an interesting question : fannie allows UW to consider airbnb income, but would they decline the property itself if the appraisal used market rents based on airbnb in the area? ?No proof but I suspect they would. They still, I assume want the property appraised as a residential income property, not a quasi hotel property.

Appraiser always check with client in this situation...

 

[CANative]

Glenn is correct - the topic of the thread is a 2-unit where one side is OO and the other side, airbnb.

The term of occupancy is about 18 hours. After that, the owner can say no more to AirBnB, VACASTAY, local rental program and put in a tenant under MTM or a longer lease term.