COMPS....Am I on the right track???

Question

I haven’t made my first deal yet, just doing my homework.  Ill use a home I passed on (I think it was good deal) for an example.  It was a 2/1 with full unfinished basement.  No structural damage just needed to be updated.  About 5 blocks from Univ of MO St. Louis (Mainly a commuter college).  The neighborhood is low to mid income.  It was FSBO for $30,000.00.  The home across was listed for $99,000.00 and one 3 housed down was listed for $114,000.00.  That is all I had to go one.  I used Xactimate estimating software) and figured I will have about $15,000.00 in repairs.  That would make a really nice home.  I figured I would have listed it for around $65,000.00.  Potential net of $20,000.00.  Did I pass a good deal up?  Like I said, it was a great home; I was just worried about the location.  What else should I look at when determining a good deal?  
This is a great site..... All replies are welcome.

John Worley · Answer

jwilson32,

The thing to remember when pulling comps is the compare apples to apples. Don't just automatically look for the house next door as it may be a completely different type of house. You want to be looking for houses that have the same sq. footage, the same style, the same age, same condition, etc. Try to stay within the same neighborhood or 1/2 mile radius and look for sales that are no more than 12 months old (no more than 6 months even better).

Even if there is house right next door that sold some high amount, if it isn't the same size, style, age, etc as the house you are looking at, than it isn't a good comp.

N/A N/A · Answer

I deal mainly with apartment buildings. So I apologize up front if my point of view is a waste of time. We look at price per square foot, bedroom mix, year blt., and existing key capital improvements. For example in the apartment biz copper plumbing over galvanized plumbing would be a key capitol improvement. I would start by gathering as much comparable properties under bedroom mix and year blt. going back as much as year and half if you cant find much. Look at the cost per sq footage numbers and see where you stand. I would look at capitol improvements last, simply because those are factors that you can control as an owner. Since your in the housing market I would consider only making those key capitol improvements (i.e. roof, plumbing, stucco, etc.)  for your rehab. For this example if you go nuts-so with the rehab, chances are you wont get your money back out of it since your in a low to mid income market. You cant anticipate the cosmetic tastes of your future Buyer.

Jim Gordon · Answer

You realy should get hooked up with a realtor in you area as part of your team. That person can do a CMA to find out the sold values in the area very easy. They can also do what is called one liners for a area an that will tell you how active the area is and what is selling or not. When you find the property pull the triger and go for it. I had a mentor that always talked about paralysis by analysis. In other words you look at the deal from so many different sides that by the time you are done the property is gone so you have done nothing.

Good Luck and check my other reply an what I think about your cost factors.

Brooke Shepherd · Answer

Well, I guess my questions to you are...  How did the sq footage compare in the other homes you compared.  How much of the sq footage was finished.  How many beds/bath/garage did the other houses have?  Did the other homes have the upgrades that you were planning on doing?

SHEP

Brooke Shepherd · Answer

Hey there-

Ok, you need to do a CMA (consumer market analysis).  This tells you what houses in that area are selling for.  So, when I am doing a CMA to figure out what to sell a home for.  This is what I compare.

- total sq. footage
- finished sq footage
- # bedrooms
- # bathrooms
- # garages
- upgrades on carpet, appliances, kitchen, hardwood floors, etc.

So, if you have a home that has 1200 sq ft, 3 bed 2bath and 1 car garage and it sold for $114,000. 
Then you have a 800 sq ft home, 2bed, 1 bath and no garage, then I would probably list the house less.  Maybe around $90,000.  Depending on some other factors.

You have to take homes in that neighborhood that have the similar amount of sq footage, rooms etc.  The price your house similar to those.  If you want you can email me.  SHEP

N/A N/A · Answer

I didn’t go inside the other homes.  I guess that would be a good step.  I just looked at the listing in the MLS.  The others did have vinyl siding and a detached garage.  They might have had 3 beds, but only 1 bath.  Not much more house for the money then the one I looked at.  I figured if I was around the $60k - 70K range, they would jump on it.  I was just worried about the area.  It was nice, but not sure if the area was $60K+ nice.  My biggest fear is being out of an areas price range.  What other factors due you consider when looking at potential rehabs?