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Answers (8)
- pmajames
- Contributions:3
Great question ksjewett. Some of the previous answers are spot on but, it would help all of us to know more specifics to dial in the best answer to your generic question. Here is what I have done. I bought a five unit for $89k w/1 renter at $400 p/m. I fixed it up, total leases at $4,400 p/m and sold it $370,000 two years later. Yes ave. appraisers do a rent survey of the area for rental value. The best ones include, cost to purchase, rental (income) approach, cost to replace, cost to repair (functional) etc. So tell me more on what you are trying to do & I can be more valuable to you in my information.
- ksjewett
- Contributions:2
Thank you all for your contributions, from what I am hearing while leasing up the property will obviously make it more valuable for a buyer, an appraiser (which will be the final word for a bank for a buyer, insurer,refinance etc.) will more likely only use comparable properties in the area to calculate value. Even if the property has been leased up from empty it may not make much of a difference as far as a stand alone appraisal goes being that it is more likely to only use comparables. Is this correct?
- Rick Chumsae, "Rick Chumsae"
- Contributions:283
There is no absolute answer. Fully leased should add value but to what? Value is added because more buyers can qualify and because more buyers not straining to qualify would usually see some value in that. The quality of the leases and of the tenants make a difference too.
It gets very nebulous very fast.
It gets very nebulous very fast.
- wetdawgs
- Contributions:26830
An appraiser looks at the building vs comps, and not the rental status.
However, a potential buyer will be very interested in the rental status. A property that appears to be difficult to rent will not be attractive to a potential investor. They will want to go through the books, and evaluate the leases. Rents should be at market value, leases should comply with all the WA state laws.
However, a potential buyer will be very interested in the rental status. A property that appears to be difficult to rent will not be attractive to a potential investor. They will want to go through the books, and evaluate the leases. Rents should be at market value, leases should comply with all the WA state laws.
- Loretta Buckner, "RealWorldProperties"
- Contributions:205
I guess the easiest answer would be: "it depends on what the units are leased for!" If they are leased at full market value, for one year, that would be a "bird in hand" rather than "bird in the bush" valuation, wouldn't it?
I am not an appraiser, but I do supply BPO's (Broker Price Opinion) for banks quite a lot, and if I were looking at value of rental property vacant vs. leased, I would definitely give higher value to a leased property. Or, another way of looking at it is "comparable value": an unleased rental property (subject) should only be compared to unleased rental property for comparables--and sales on leased properties are always going to be higher.
Hope this helps!
- Brent Fosso, "Brent Fosso"
- Contributions:157
I strongly recommend getting it fully rented. You have an income property and its value will be based on the specific income it brings in. Even though appraisers will do a rental analysis for the area, the first question they ask the seller is how much the units rent for. Also, from a buyer's perspective they will feel much more confident on the income potential if they see a true "starting point" with it being fully rented and occupied. Also, this will be very important to the buyer's lender. Income property is viewed as a business, and the current income of the business is a significant factor.
- Deborah Holmes, "Debbie Holmes"
- Contributions:386
It would be a much more desirable property. The appraised value might not change but the value in the eyes of the investor would certainly increase.
- Dave Skow, "daveskow"
- Contributions:1105
shouldnt really change an appraisers valuation as appraiser will both use sales comps and other rental properties to complete the apprsl report
How much value does leasing up a fourplex completely add if it was empty when purchased?
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