BiggerPockets

in Texas, you have to have a real estate license, or have a hook-up with a realtor to find the comps in areas for what houses have sold for. so clearly, all i have access to right now is just what houses are on sale for. What do you all do? Is anyone else in my situation?

Mike, with a comprehensive website such as har.com in my area, do you still recommend actually physically visiting 100+ houses?

either way, it is encouraging to know that i won't need to have actual comps to determine value!

If you are planning on getting into this business you should know your target area comps block by block. Comps will change in many area's from one street to another. As Mike suggests, get out and look at the homes that are currently for sale or have just sold. This question has come up many times in the past and I have a hard time understanding why people cannot figure out what a home is worth.

Find a home that you are interested in, look on the auditors site for sale history. Find other homes that have sold recently on that block and what they sold for. Look at homes that are currently on the market and how long they have been on the market at that price. Don't use Zillow or any of those other online tools. Most of the time they are way off.

I would look at the auditors site for tax value first. This will give you a ball park. Then look at sales history on the home and several others. Has it gone up over the years or declined? If you can pick up a house for 100K and right across the street you have comparable homes worth 200K, then I would have to assume that you can fix your 100K house up and sell it in the upper 100K range.

I bought a house for 23K and all around it were 60K homes, I dumped a little money in it and now it's worth 64K. It's really not that hard. If you are buying 100K homes in a 200K neighborhood, then that sounds like a investors dream neighborhood. The other thing to keep in mind is are people not listing homes for sale or are there homes for sale and their just not moving at their asking price? Big difference..

Thats why you have to go look at lots and lots of houses. At the very least, go drive up and down every street in your target area. Look at all the houses you can. Eventually, you'll get to 100. If your area is small, and the houses are consistent (i.e., variations on the same floor plan built by the same builder), then it won't take as many to see the pattern.

Better yet, park the car and walk the streets, you might even bump into someone that knows someone that wants to sell that hasn't listed it with a Realtor. BINGO - get to the seller before anyone else.

Also when you walk you get to look closely at the houses, when your driving you usually won't see that crack in the foundation, but when you walking and your looking over every detail, many times it will jump out at you.

-Michael

Confusing!

It's only confusing because you haven't done it. The question is whether you've got what it takes to be successful (most people do not). If so, then stop typing and start looking at houses.

Good Luck,

Mike

how much is it?

You've located the property that you are potentially interested in purchasing, have looked at it, and determined that it meets your basic investing goals. Before you pat yourself on the back for a job well done, you need to establish its value to avoid potential financial disaster. If you take the word of the seller or the county tax rolls to establish its value, you could lose your shirt, especially in a real estate market that has seen values drop by tens of thousands of dollars within a matter of months.
Depending upon the kind of investor you are you'll utilize one of the three methods of establishing the value of a property. They are:
Comparable Sales - If you're investing in primarily single-family or multifamily properties with fewer than five units, by far the most popular method of establishing value is the comparable sales method. This method consists of locating recently sold properties that are substantially similar to the one you are considering purchasing and are located in the same general vicinity. A skilled appraiser typically has many years of experience in determining value, but you can do the same thing either by going to your county courthouse and compiling the information yourself or by working with a realtor who might be willing to provide these figures to you. You can also get a rough estimate of values in many areas by utilizing an on-line resource such as Zillow.com. Once you have your comparable sales figures you'll need to compensate for any differences, such as the lack of a garage, fireplace, or even a swimming pool. In order to compensate for the differences in square footage of your subject properties, you can divide the sales prices by the square footage of living space to come up with a cost per square foot.
Replacement Cost - While not nearly as popular as the Comparable Sales method, another way of determining the value of a property is by estimating what it would cost to re-create the same property in the same area. You would need to determine building costs, the cost of materials, and also make allowances for depreciation of the property so that it is substantially similar to the property you are considering purchasing. If you're experienced at estimating building costs accurately and are aware of the current cost of building materials and supplies, the replacement cost method may be one which you will want to utilize. However, it isn't utilized very frequently. If the Replacement Cost method is one that you'd like to use to determine value, you could very quickly arrive at a figure by contacting a local contractor and asking them how much they would charge you by the square foot to build a home in the area of your subject property. Don't forget to factor in depreciation to match the condition of your subject property.
Income Valuation Method - The third method of determining the value of a property is to use the Income Valuation Method, sometimes referred to as the Net Income Approach. This method is used to determine the market value of a commercial property or a residential property with more than five units. It's a relatively simple process. First, determine what the gross income is for the property and then subtract all expenses, including debt service on an annualized basis. Multiply that figure by a factor of ten. The resulting number is about what your property is worth. What's nice about this sort of property is you can increase its value simply by increasing its net income, reducing operating expenses, or both.
Once you're able to determine the value of a property you can write an intelligent offer that doesn't cause you to run the risk of overpaying for a property. Remember, though, that real estate prices are extremely volatile right now, so make sure any properties you use for comparative purposes are recent sales figures. If you have accurate numbers, you can write impactful, precise bids that stand a greater chance of being accepted and allowing you to turn average returns into explosive profits.

Market value is important is you're doing fix and flips. And might matter if you're getting a loan.

If you're doing rentals, local rents are more important to determining the quality of the deal than prices. Price vs. rent determines if you can do rentals in the area or not. Some areas just don't support rentals.