Tonight’s meeting was very informative. Flynn Mirtle Moran is an appraisal firm who have been in Kamloops 55 years. Carey and Brett were very candid and I learned a bunch of new stuff about the appraisal industry:
– In 2008 in response to the financial crisis a 3rd party entity was created to be a buffer between lenders and appraisers in an effort to avoid “collusion”. This third party assigns inspection contracts based on price and many residential appraisers have been underbidding and driven the market price of a full appraisal to below subsistence levels for major firms. The end result is these individuals working from “their basements” are turning out an inferior product/report because they are not in a competent firm, so quality of appraisals is lowered.
– Many in the room agreed, some even advised that the banks have charged them for appraisals, but no one stepped foot in the property.
– It’s a data mining industry now on the residential level(an a very cutthroat business from the sounds of it), where in the past detailed measurements were taken of EVERYTHING and the cost approach was used to value properties.
– Flynn Mirtle Moran is primarily in the commercial appraisal side of things, but is doing residential appraisals as a training tool for their staff. Commercial appraisal certification requires a great deal more industry training and substantial residential experience to become qualified.
– the prevailing cap rate in Kamloops is 6.5%, but for an older beat up building it could go as high as 7%. A brand new building might be 5%
– there are so many factors in determining cap rate: type/use of property, suite mix, age, adherence to a maintenace schedule, etc.
– cap rate is basically a measure of risk, the lower the cap rate the lower the risk of income loss
– cap rate is net income➗ purchase price(or market value as determined by an appraisal)
– it takes longer to become a certified commercial appraiser than to become a doctor
– I asked “how can I maximize my appraised value?” The answer I got was to spend money on bathrooms/kitchens and other high ROI renovations, but trying and hype your property up to the appraiser will likely just annoy him/her. It’s common for the owner to “be in the ear” of the appraiser and it doesn’t influence anything much.
– There are lots of commercial properties transacting in the interior. Storage facilities are being bought up/built in Kamloops, there used to be a shortage of supply for mini storage but it’s now catching up.
Overall it was a great meeting and nice to talk to some knowledgeable professionals!
Be sure to visit next months’ KREIC meeting where I will be presenting “The Polar Bear Path to Wealth” and some deals. See you there Feb 26th!
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