Calue on Rental properties

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Posted by michaela-CA on May 20, 2009 at 15:46:52:

This is not a commercial property, but I would think that I could treat multiple homes that are rented as commercial, can't I.

I'm trying to create some notes and ordered appraisals on the fully rented properties. I made it clear to the appraiser what this was for and that I was looking for appraisals based on income. I assumed that meant that they would base it on rents that I'm receiving and use some kind of cap rate etc.

Today I received the first one and they based the value on other sales, which is totally skewed, because every sale in the neightborhood in the past year has been foreclosures. Since I"m not trying to sell, I would think that this is not the right value, but I was told that's what they have to use, even for income approach.

It's a Duplex and median rents in the neighborhood are about $ 1,000 ($ 500 each side) and the valuation came in at 41K, based on other sales (that were all fixer uppers, but there aren't any fixed up sales in the neighborhood).

So, if I use 75% of my income as NOI, that would make it a caprate of 22. I don't think that's really a valid value, is it?

Thanks

Michaela

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