[quote=davelj]So, how do the lenders go about “valuing” the collateral underlying this “investment”? Why, they just look at what other folks are willing to pay for similar collateral… potential cash flows be damned! Wouldn’t it be be smarter… maybe, just maybe… for the lender to take into account what the house would rent for in case, god forbid, the lender ends up taking back the house? Market rents aren’t that hard to find for most houses. (Ask yourself: How difficult is it for you to figure out roughly what you should be paying in rent for a typical 2,500 square foot house in X area of San Diego? With Craigslist and other free online services – which are pretty blunt instruments – it’s not that tough. And that’s for the non-professional. Appraisers have access to all sorts of rent and market data not available to the general public.)[/quote]
Davej, Don’t banks factor in income (i.e. Rents) when providing loans for commercial residential properties? Don’t banks factor in the rental income for a SFR rental property? I agree with you, they should factor in the affordability of the homes based on rents.
Lucky In OC
PS: I just realized the spell checker on this site does not understand ‘affordability’ – kind of ironic when most of the users do…
