Very short term rental...

[gregb]

Brother has been operating as an Airbnb for last five years. He has deposits on hand and rental contracts going forward over the next 12 months.

 

[glenn walker]

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. Appraisers should check with lender client but that is my understanding about 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.

Now JG-let's face it next these homes and small units will be used for

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...

Like many threads this one is getting off the tracks. The AIR-BNB income stream is never stable and it's unpredictable and therefore the assumed baseline is what current regular market rents are. Example: if the subject is a 1,500 Square foot Ranch in Los Angeles and market rent survey indicate $2,000 a month then that;s what is used- Even if the owner provided a P & L showing he/she had been taking in $3,000 a month on a AIR-BNB program the additional $1,000 a month is not counted because its considered unstable income and in the event the program dried up or the owner decided he/she did not want the hassle then the house reverts back to a regular $2,000 a month rental. The appraiser does not GO OUT and try to find similar homes or units that are AIR BNB rentals because there is no way to verify what different owners bring in. Just like BOARDERS who live in a house with the owner- If I rent a bedroom to Uncle Billy for say $600 bucks a month- Fannie will allow up to 30% of that $600 to be counted as income against my DTI ratio and I have to document my boarder has paid that for at least 10 out of the last 12 months. MY POINT is not so much about Underwriting it's simply pointing out that the appraiser will only use rent estimates based on what current or estmated rental comparables are in the Subjects market area. In the OP"S case if the rents on the Subjects 2 unit properties are $1,000 per month then that's what he uses and AIR-BNB income is not involved on the appraisal side other than disclosing it in his report so the lender knows its not stable income.

 

[J Grant]

agree with your last post Glenn, but when you bought up Air BNB income earlier some here will think that meant qualifying the property vs it is just for UW qualifying the borrower.

Therefore, as far as appraisal of the property, it is not "one side oo and the other side airbnb". It is a 2 unit small income property.

 

[Terrel L. Shields]

Appraisers should check with lender client

which is all I said in the first response to the OP. And I stand by it. In one of our annual "Day with the Board" CE classes sponsored by the AALCB it was stated that they consider B and B s to be commercial. And AirBnB stands for air (mattress) Bed and Breakfast.

"Some lenders and boards consider B&B of any type 'Commercial", so call your state board investigator to see if you can. Then call the lender for their guidance."

 

[Mark K]

So, according to some, any type of B&B, air or brick and mortar, is now to be considered a commercial property. And since nearly all SFRs and duplexes can be used for air B&B, the CRs are practicing outside of their license scope if they appraise ANYTHING that might be considered commercial. And, according to some (and some others) a CR cannot even do a HBU analysis on a commercial property. We lowly CRs can't even do a HBU on a SFR anymore.

Either you can follow the logic all the way thru or you can't, in which case it just shows the absurdity of the posited idea that a residential duplex is a commercial property.

 

[CANative]

What if the owner was using the other unit to run his appraisal business. Just a lone, sole proprietor. Commercial use?

 

[Elliott]

Just about anyone who buys a duplex can rent it on a monthly basis and the expenses are the same as home ownership. A vacation rental, or a BnB, requires daily management, advertising, affiliation with national or international app, a cleaning service, significant operational expenses, significantly higher maintenance expenses, occupancy taxes, government regulations, and potential competition which can significantly affect occupancy and revenue. Its not a Ma&Pa rental, its a one-unit motel business.

I had a motel owner call a month ago who wanted to appeal his property tax assessment. He was telling me his income was down because of BnBs and vacation rentals. I didn't want the assignment, but told him I can't understand why motel owners weren't screaming bloody murder for the last 5-years since vacation rentals are in direct competition with motels who have restricted zoning. He agreed they should have done something sooner.

"They paved paradise And put up a parking lot With a pink hotel, a boutique And a swinging hot spot" next to your home.

 

[Mark K]

What if the owner was using the other unit to run his appraisal business. Just a lone, sole proprietor. Commercial use?

Commercial use, yeah. The same would follow for anyone operating their appraisal business out of their spare bedroom. That doesn't change the nature of the real estate to a commercial property. Operating a day care (or any of a large number of home occupations) out of a house doesn't change it to a commercial property.

What's that old saying...'Just because a cat has kittens in an oven doesn't mean they're biscuits." I think that's one of Terrel's. Just because someone operates a business out of a house does not change the nature of the house to a commercial property (unless they've made significant changes to the property to accommodate the business, obviously).

 

[glenn walker]

agree with your last post Glenn, but when you bought up Air BNB income earlier some here will think that meant qualifying the property vs it is just for UW qualifying the borrower.

Therefore, as far as appraisal of the property, it is not "one side oo and the other side airbnb". It is a 2 unit small income property.

Terrill may have a good point when he mentioned licensing levels required ? A legally permitted AIR-BNB in Los Angeles requires a business license and is not allowed in single family homes unless it's also the owners primary residence, so its more like a supervised bed & breakfast compared to a vacant home with people coming and going 24/7. Does this raise the bar up to a CG license only. What about H & B use even though economically the highest and best use may be to use for daily or very short term rental when it's illegal in the City and not in compliance with Zoning land use , or rent control laws what liability lays on the residential appraisers back. If the LA appraiser accepts the assignment and he knows the area and that its not legal its a foregone conclusion the lender is not going to want him/her to proceed, and in most cases most lenders have not done enough of these to even know their own guidelines until the poor appraiser completes the assignment and its delivered, with the Zoning Compliance Box Checked Illegal with a short explanation that Los Angeles Zoning does not allow the daily rentals or AIR-BNB type rentals in this zoning. Then poor little CR gets to the H & B use box and suddenly starts hyperventilating because he realizes that its kinda hard to check the existing use as the H & B use when he knows if the owner gets caught by the City Rental Compliance Gestapo they will be all over the poor little no-nothing landlord like White on Rice. Hopefully its a SFR and not units under rent control because when HCIDLA finds out the rental is not a house but units in rent controlled district now they can charge him with rent gouging and god forbid if someone complains that they offered to rent it for market rent and he wanted double or triple. Now we may have the DA involved and the poor little LA landlord is considered no less despicable than a dirt bag Slum-Lord.

NOTE: This is not an-Issue where AIR-BNB or short term rental operations are legally allowed and comply with zoning and land use of that particular City or County but in some Cities getting caught can be real nasty. So whats the Los Angeles appraiser to do ? Walk-Uncle Billy Died for th e5th time this year- Be sick with the flu or go through the pain and agony of fighting with a lender who just wants to see the Zoning Box checked legal and the H & B use box checked yes.. No worry's if your in Texas but in Los Angeles you and the owner may just get unlucky and end up on the front page of the who is responsible for the homeless population--Of course we all know it's those same appraisers and investors who helped inflate the last bubble ( AKA ) Appraisers : ) LOL

5-CITIES WHERE AIR-BNB IS ILLEGAL IN 2019

On December 11 the Los Angeles City Council approved a new set of home-sharing rules that bars residents from renting out homes that are not their primary residence or properties that are under rent control. The City also requires business license and taxes paid on short term rentals that are legally permitted.

• Los Angeles, California. ...
• New York City, New York. ...
• Santa Monica, California. ...
• Las Vegas, Nevada. ...
• San Francisco, California. ..
• 5 Legal Real Estate Investing Tips To Know Before Buying A Property.

 

[glenn walker]

LOS ANGELES HAS BEEN FIGHTING WITH AIR-BNB FOR YEARS NOW THEY FINALLY DID THIS . How does this effect the appraiser ?

• On December 11, the Los Angeles City Council approved a new set of home-sharing rules that bars residents from renting out homes that are not their primary residence or are under rent control.
• The new law, set to go into effect in July, also caps the number of days a host can rent out their home or a room to 120 days a year, though there are exceptions.