OfflineMy Lender emailed me and was questioning the Value that I came to using comps that I provided him. He de-valued the assessment That I came up with, but it didn't affect the funding.
I started thinking about it, because the property is NOT an average property. It has an APT. in addition to the Main House on the property.
I started thinking about the property and tried to compare it to the comps that are used to place VALUE on the property.
I was convinced that there had to be a way that this property is worth more, and there had to be a way to prove it.
Then it hit me. CASHFLOW
We all live in different parts of the country, and if you look around you know what the "average" price is for an "average" home in your area. YES there are different amenities, but the "average" house goes for an "average" price.
In my area people pay $900-1200 a month for an average home... 3bd/2ba ...etc.
With those numbers in mind I started thinking about my property. It has the main house and apt. House is rented at $1050 and the Apt. at $550.....that is $1600 per month.
My assertion of value is this:
If the CASHFLOW of the "average" home is $1200 in my area Then my property would be "average" BUT THIS IS NOT THE CASE.
My property brings in $1600 per month a full 33% MORE CASHFLOW than the "average" property.
So with this fact in hand I assert that the 'VALUE' of my property could be up to 33% MORE than "average". Because this value is subjective yet tangeble...I told my lender that this should be assessed as an increase in VALUE of at least 10% to be fair. That 10% is around $26K, and I don't think that I am wrong to assert this value. I am waiting to hear his response.
This being the case I STRONGLY assert that in the valuation of ANY property that the CASHFLOW analysis needs to be integral with the process of evaluating property value.
In the case of my property....the lender said that the "comps" set a value of "X" but I say that it is actually "X + $ = True Value"
If your property has ADDITIONAL VALUE that is NOT part of the "average" comp you are using.....it should to be a factor to be evaluated for its added value. You need to question whether or not another investor, or buyer could realize and understand this value, and thus add attraction to the property.
Sometimes you may just need to point out the added Value in order to include it, and to justify your assessment of value.
Now mind you.....you don't need to point this "added" value discovery out to a SELLER if you notice it...You know....like the BREIFCASE of cash you discovered hidden in the attic as you did your OWN house inspection....he might just raise the price on you...LOL
There is NO difference between adding value because of "the view" , "the neighborhood" , which "school system" it's in, or any other ammenities that a given property may have. I am sure that my lender "overlooked" this key
If you can indeed express and help another person to see this added value...it will then indeed become a REAL ASSET and carry with it....VALUE that can be added to the property and the bottom line.
Just my opinion
Sam
BUILD your knowledge base....it is your ARSENAL to wage war against disbelief and the negativity of the status quo. You need your weapons......It's your choice whether you carry them or not.
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Build Relationships and open the door to opportunities that could once only be dreamed of......never take those relationships for granted.
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His specific example of having an additional living quarters on the property bringing in the additional cash flow is something that happens more often than you might think, especially in rural areas. In SW oregon, where we're from, it's a rural area, and most everyone lives on 5-10+ acres (poor rural, not rich estates, LOL!). Lots of times you'll find an old mobile, or a small guesthouse, or a barn with an "apartment" above it - living quarters for ranch hands, mother-in-laws, or multi-generational families. Down there, I do belive that the appraisers take into account the additional homes, over and above the simple square footage of the extra space. These are the places we LOVE to look for down there - little gold mines!
And, like Sam talks about, there's TONS of features about homes besides extra living quarters that ADD VALUE. Those places are almost always worth a second look, because that extra value can really make a deal work, and it's often overlooked. I mean, if the appraisers not seeing it at first glance, how many other potential buyers are?
Way to go Sam!
Tracey R.
The lender did indeed agree that this is a factor that should be considered, and he went into some details about the calculation of how that plays out. I will try to update when i get more time.
Sam
BUILD your knowledge base....it is your ARSENAL to wage war against disbelief and the negativity of the status quo. You need your weapons......It's your choice whether you carry them or not.
------------------------------------------------------------------------------
Build Relationships and open the door to opportunities that could once only be dreamed of......never take those relationships for granted.
--------------------------------------------------------------
Don't let EXCUSES be the nails that keep you INSIDE the box.