Appraiser Advice to Investors

Line Up Financing First

Find out how much money you can borrow and what the payment will be.

Decide on the location where you will look for properties

Pick an area where you are familiar, or plan to spend significant time learning what is going on in that particular location and property types you are considering.

Bring Together Your Team

Lender – pick one who has been around awhile and is familiar with the area where you are considering purchasing properties.

Real Estate agent – only use local real estate agents and seek out ones that you can work with – who will always tell you the TRUTH.

Property Manager – again find a local property manager, who will help to determine a reasonable rent for a property you are considering.  Will pre-qualify a tenant, collect rent or evict a bad tenant; set up regular rent increases and take care of property problems – so you don’t have to.

Appraiser – get your own appraiser, the appraiser the lender will hire has the lender as his / her client – not you.  Use a local appraiser with over 10 years of experience (20 years would be even better), I recommend using an Appraisal Institute SRA designated appraiser (appraisalinstitute.org), if you can; and insist on an appraiser who will tell you the TRUTH.  In fact you might consult with an appraiser, before starting to look for a property.

Settle on Your Game Plan

Are you going to buy and hold for the cash flow?
Or
Buy and flip for profit

Questions to be Answered Before you buy

Are home prices going up or going down in the area or for the property type you are considering – and is the rate of increase or decrease speeding up or slowing down.

What is the inventory of homes for sale (has it been going up or going down) and what is the rate of sales.  If there are 100 homes listed for sale and they are (now) selling at a rate of 10 per month – you would have an inventory of 10 months.  If last year (in the same time frame) there were 50 homes listed for sale and selling at a rate of 25 per month (= 2 months of inventory) you can see market conditions are getting worse.  If the reverse (fewer homes for sale and selling faster) conditions are improving – especially if prices are moving up.

Is there a problem with foreclosure in your market area or many homes selling Vacant?

Are there problems with the local job market?

What is the affordability ratio: the percentage of residents who can afford the median priced home, if below 20% there could be a problem, especially if the ratio is dropping?

What is the potential rent for a property under consideration and does that rent justify the purchase price (down payment, rehab costs and mortgage payments) especially in a market where home prices are not currently going up.

Beverly A. Bayer, SRA
Moreno Valley Appraiser: 951 247-3674
www.AppraisingMorenoValley.com
MVappraiser@yahoo.com

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