Appraising Airbnb Properties

Problems When Appraising Airbnb & VRBO Properties

by Richard Hagar, SRA

Excerpts: Residential appraisers are being asked to appraise these properties, along with their elevated income, as “typical” residential properties. These requests involve homes in numerous vacation spots ranging from Sedona, San Diego, Montana, Lake Tahoe, to Miami, New York, Seattle, New England, and every vacation spot in between.

Appraisers are being told by their AMC clients and loan officers to appraise these as residential properties. They are told it’s fine to use the total yearly income and “simply divide by 12” to produce a monthly income that can be used to value these places using a Gross Rent Multiplier (GRM). But is it really that simple? Short answer—no. Long answer—it’s complicated.

First of all, the value of an STR has three major components:

1) the real estate,

2) personal property, and

3) the business.

The business side includes replacing worn out or damaged furniture, window coverings, bedspreads, towels, the property’s internet listings, credit card processing, weekly cleaning, and daily management decisions involved with running the STR business. On top of that, what if the credit card is stolen and the last party animal damaged the house or fell off the deck and wants to sue the owner for a defective deck railing? STRs are far more than real estate; they include a business also known as a “growing concern” or intangible property.

To read more, click here

My comments: If you want to know more, before (or after) accepting an Airbnb appraisal, definitely read this article. The article is one of the best I have read, and includes many of the AMC, USPAP, GSE, etc. issues. The article has a link to Richard’s webinar on the topic. I have known Richard Hagar for many years. He is one of my go-to appraisers for these types of issues. He is an excellent teacher. Taking his classes is definitely worth the time.

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NOTE: Please click read more below for the other topics in this long blog post on  review appraising, 3d home new subdivision in Texas,  unusual homes, mortgage origination

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