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So I am buying a rental property as an investment and expect to do the purchase as a cash deal. So technically there is no lender to force me to get an appraisal on the property.

Of course, I still want to get some form of appraisal to make sure the purchase price isn't out of line with the value of what I'm getting for my money.

I'm wondering if anyone has experience with a low cost option from a real estate appraiser where they don't do the full treatment (all the forms and an exact value on the property) that a lender would require, but simply answer the question "Is this property worth at least $x?"

I'm not optimistic, but thought I'd ask the community if you've ever heard of such a thing.

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You can get a "drive-by" appraisal or an assessment from a local real estate agent.

This obviously will give you a less precise and not as reliable information as a full appraisal, but will be significantly cheaper.

  • Nice answer. That terminology enabled me to find a good page with more information. Hope you don't mind that I edited your answer to link to it. – JohnFx May 16 '13 at 0:08
  • I'm surprised nobody mentioned that when investing such large amounts of money - why not spend the extra money to lower your risk? This thread makes appraisals sound like they cost tens of thousands of dollars to have done..... – Ross Dec 11 '15 at 21:27
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Something that you omitted in your question is whether this prospective purchase is a single family residence (SFR) or some other type of real property. If this is an investment purchase as you say it is, then the only real way to tell it is worth what you are willing to pay is based on the income it produces. Once you complete an income and expense analysis you can get a CAP rate to compare it to other like properties in the area. This is the best way to value income/investment real estate. If you don't know what a CAP rate is and how to calculate it, then you might be over your head a bit.

Another important aspect to consider is the reason to pay all cash for this property. The main reason to invest in real estate is to use the banks money as leverage. Again, you should understand these kinds of basic real estate concepts before you dive into purchasing investment property.

  • Good point. It is two detached single family houses on a single lot, which is why most appraisers are hesitant to take the job. Both houses have current tenants and it is definitely cash flow positive even if you don't consider the equity. So to me it is certainly worth it. My only reason for worrying about an appraisal is in case I have to later sell the property. – JohnFx Jun 3 '13 at 0:28
  • @JohnFx The only reason for an appraisal is to make the lender all warm and fuzzy that you're not overpaying for the property, it has nothing to do with the sell side. After all, any appraisal done today won't matter when you sell next year. When calculating your cash flow, are you taking into consideration a 70% LTV loan payment? You could always purchase two similarly priced properties with 30% down on each and still have a good cushion for any unscheduled repairs, like a roof. If you go the mortgage route, I can assure you that the return you get will be MUCH larger than an all cash deal. – sdgenxr Jun 3 '13 at 18:49
  • I am taking a loan, just not a mortgage loan. I'm taking a home equity loan, which doesn't require a down payment up front. So the capital outlay is minimal. – JohnFx Jun 4 '13 at 2:34
  • @JohnFx Sounds like you've pretty much got everything taken care of! Cudos to you for getting into the RE investment world. Feel free to come back if you have any more questions. – sdgenxr Jun 4 '13 at 14:16
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If you get somewhat of a discount appraisal you're probably not going to save much money, and given the (probable) size of your investment you might as well pay the extra money. You'll learn something about the market or investment anyway. Maybe it will open you up to some new ideas like trying to flip the property or pulling out some equity to go after more properties.

  • I agree. Less than $800 to protect an investment that is worth 50x, 100x, 200x that? You would be only increasing your risk buy not having an inspection and appraisal done. – Ross Dec 11 '15 at 21:26

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