Appraise At 6x Gross Rents?
I was talking to a loan officer at Republic Bank a couple of hours ago, and he said their appraisers generally appraise residential income property at six times gross scheduled annual rents. Is this typical?
I personally pay up to 8 times GSR, and I think that is a bargain for a nice property. Last month I had a rental appraised and it came in at 11.22 times GSR, which I felt was a bit low but close.
Has anyone else heard of this, or is it just this area or this one bank?
Thanks,
Chris
Chris,
That seems totally out of scope here. For instance, I know 10 properties thoughout the area that each command $900 a month and are currently rented at that. Using that formula they would all appraise for $64800 (please check my math). The worst of these would get twice that at retail. The best location would be triple. Our rental market has been stagnant for a few years while the single family market has been out of sight.
Jim
NewKid,
Yes, they use the DSCR to determine viability of the loan. The GSR is just used for the appraisal. It is still going to increase your interest rate and cause you to pay PMI when they appraise it unrealistically low.
Chris
Chris
And I always thought that PMI was dictated by the LTV. 80% LTV or lower, no PMI.
And I always thought the interest rate was a function of the borrowers credit score and the parameters of the loan program rather than the appraisal.
I learn something new every day.
NewKid,
"And I always thought that PMI was dictated by the LTV. 80% LTV or lower, no PMI."
It is. But the value is determined by the appraisal, so if it is appraised low then the LTV is going to be higher.
"And I always thought the interest rate was a function of the borrowers credit score and the parameters of the loan program rather than the appraisal."
That of course is true also, but if the LTV is above 80% you either have to take out a high interest second or use a higher interest, over 80% LTV loan program.
Chris