Appraised price lowered than purchase price

[llee]

Hi,

I am planning to buy a property in Ottawa, but the appraised price is 11% lowered than the purchase price. The property is a duplex (2-unit) and has many parking spaces for rental to government workers nearby. I think the appraiser did not take into account of the parking spaces available because they`re not *secured* income. If I calculate the (annual parking income / cap rate of 12%), it`ll exceed the 11 difference. So it looks like I am OK on that front.

I checked with the City`s zoning, and I was told that in residential area, I am not supposed to rent out any parking space to non-tenants. If I want to rent the parking spaces out, I need to apply for rezoning as a commercial parking lot ($14,000 and half a year processing). The City staff told me they don`t usually bother, unless someone complains.

If you were me, would you get the property?

 

[JohnS]

QUOTE (llee @ Jun 22 2008, 06:18 PM) Hi,

I am planning to buy a property in Ottawa, but the appraised price is 11% lowered than the purchase price. The property is a duplex (2-unit) and has many parking spaces for rental to government workers nearby. I think the appraiser did not take into account of the parking spaces available because they`re not *secured* income. If I calculate the (annual parking income / cap rate of 12%), it`ll exceed the 11 difference. So it looks like I am OK on that front.

I checked with the City`s zoning, and I was told that in residential area, I am not supposed to rent out any parking space to non-tenants. If I want to rent the parking spaces out, I need to apply for rezoning as a commercial parking lot ($14,000 and half a year processing). The City staff told me they don`t usually bother, unless someone complains.

If you were me, would you get the property?


Hi llee.
I have a property at Tunney`s and rent out parking there. Feel free to message me if you have any questions.

Have a good day!

John Scanlon

 

[Thomas Beyer]

QUOTE (JohnS @ Jun 22 2008, 04:24 PM) Hi llee.
I have a property at Tunney`s and rent out parking there. Feel free to message me if you have any questions.

Have a good day!

John Scanlon

doing something "illegal" or "unzoned" or "not quite in the rule book" is always risky .. yes, you can steal a coke at Safeway and likely no one will notice .. and many a REIN member rents our an illegal basement suite with no problem for years .. but there is risk .. and you have to answer to God and yourself and perhaps government authorities if this makes it right even if no one notices .. !!

So, I`d buy it at the price you feel comfortable WITHOUT the parking lot rent .. and treat it as extra income if this is what you chose .. and in the mean time get a re-zoning application .. at the risk that someone complains .. and at the risk that it will not count towards the income and thus, value ! What would you do if your were a licenses/certified appraiser ? You`d also NOT count the income which is the right legal position ..

 

[invst4profit]

when it comes to appraisals it depends on who the appraisal is being done for. Often the appraisal will come in low if it is being done for the bank and high if being done for the seller.
Other than getting a mortgage or LOC the appraisal is not that important. It really does not matter what someone says a property is worth for a rental property the investor calculates the value based on the rental income.