Real Estate Deal Analysis & Advice

The Ultimate Guide to Quickly Estimating a Property’s ARV (After Repair Value)

Expertise: Real Estate Investing Basics, Personal Development, Business Management, Personal Finance
46 Articles Written
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What’s the #1 skill you should acquire as a real estate investor? I would argue it’s learning how to accurately value a property.

“Buy low, sell high” is the core success formula in real estate investing, but in order to buy low, you need to know how to evaluate high.  

So, this guide will explain, step by step, how to do a quick and dirty estimate of value for single family or other small residential property. Commercial or larger multifamily properties are not covered here because they require a different process.

Why Not Just Hire an Appraiser or Agent?

You might argue that some appraisers and real estate agents are experts at valuing real estate. Why not just outsource this job to them?

Appraisers and agents ARE a key part of your team. You should certainly depend upon experienced and knowledgeable professionals for help and guidance.

But each and every day, you should be looking at dozens of potential investment deals if you hope to find the best ones. Can you ask an agent or appraiser to evaluate every one of those for you before even making an offer?

No. It’s impractical and too expensive. You need a quick and dirty valuation process of your own.

And even when you do hire an expert, can you afford to completely depend upon someone else for one of the most important calculations of your business? I like to do my own quick and dirty valuation on a property, and then I’ll compare my calculation with the appraiser or agent’s value.

Most of the time, my estimate is similar to the expert’s. But happily, the expert sometimes teaches me new and helpful insights. And every now and then I find the expert is wrong.  And as an  investor, being wrong hurts because it loses money.

So, this guide is ultimately about asking the right questions. It’s about learning the basics of what experts are doing. And it’s about making and keeping more money as an investor by learning how to think critically for yourself.

Let’s get started!

evaluate-property

Quick and Dirty Valuation in 3 Steps

The quick and dirty process of valuation is a shortened version of something called the sales comparison approach (SCA) to real estate valuation. The SCA is a process real estate brokers and appraisers often use to estimate value by comparing and contrasting one property to others.

Investors often buy fixer-upper properties, so this quick and dirty valuation gives a starting point to understand the potential value of a property, which is also called the after repair value (ARV).

For experienced investors with a lot of history in a neighborhood, this quick analysis might be all you need to make a decision. For inexperienced investors or someone new to a location, it might just be the first step before getting help from others.

Here are the 3 steps:

  1. Gather information on the subject property.
  2. Gather information on comparable properties.
  3. Compare comps and subject in order to estimate value.

I’ll unpack and explain each in the next sections.

Step #1: Gather Information on the Subject Property

The valuation process begins with the subject property. This is the property that you are trying to estimate a value for.  

Related: Your Complete Guide to Analyzing a Property in Just 10 Minutes

In my world, the subject is usually an opportunity to make an offer on a property. It may be a property listed on the MLS (Multiple Listing Service), or it may be a seller who contacted me directly from a referral or from one of my marketing campaigns.

Other times, the subject is one of my existing properties. For example, this may happen when I’m considering selling a rental property.

The key to this step is gathering accurate information about your subject. You will be comparing it to other properties in step #3, so you want to have a good basis for comparison.

Here is a list of some information you will want to gather, although it’s by no means all inclusive. I’ve separated them into broad categories to make them easier to remember.

Location:

  • City/municipality? Inside or outside city limits?
  • Neighborhood?
  • School district?
  • Proximity to attractive amenities (like a lake, ocean, park, cultural center, etc.)?
  • Proximity to obnoxious things you can’t change (smells, loud noises, power lines, junky neighbors, dangerous dogs, etc.)?

Lot:

  • Size (acres or square feet)?
  • Fenced yard?
  • Corner or interior lot?
  • On busy road?
  • Major slopes?
  • Mature or non-existent landscaping?

Building/House:

  • Size (square feet)?
  • # of bedrooms, baths, garage?
  • Type (house, condo, townhouse, etc.)?
  • Style (bungalow, ranch, modern, etc.)?
  • Year built?
  • Condition?
  • Finishes (i.e. hardwoods versus cheap vinyl, or granite counters versus laminate)?

Much of the location, lot, and building information will be included on the MLS info sheet from your agent. MLS sheets also usually have helpful photographs so that you can see features with your own eyes. Here’s an example:

PIC 1 - MLS Info Sheet - screen shot

If the property is not listed or if some information is missing, you can also search other sources like your local tax assessor, Zillow.com, or a Google search. While Zillow is not as comprehensive as the MLS, it’s very user friendly and can often get the job done.

Here is a screenshot of property information on Zillow.

PIC 2 - Zillow Screenshot - property info

I also like to see the property myself before estimating a value. No matter how sophisticated online real estate sites become, most house buyers make a decision to buy after they’ve had an in-person, emotional connection with a location and with a house.  

So, it pays to replicate that buying decision with boots on the ground as often as possible when you are estimating value as an investor.

When I visit a property, I bring a checklist with me that includes all of the subject property information listed above and more.  

PIC 3 - Deal_Worksheet_CoachCarson - screenshot

I also take as many pictures and videos as possible. Both of these help me to remember everything for later comparison.

Step #2: Gather Information on Comparable Properties

Once you’ve gathered information on the subject property, you can then start searching for and filtering the best comparable properties (a.k.a. comps).  

Related: Looking to Invest Out-of-State? Here’s How to Pick and Analyze a City

To start, where do you find the comps?

The best source is almost always your MLS through a local real estate agent or appraiser. A professional agent or appraiser will know how to apply filters that you give them to get good comps.

If you are not a real estate agent yourself, you’ll need to get one on your team who is willing to send over comps regularly. If you are using a buyer’s agent for purchases, this would be a reasonable request.

As an aside, lack of access to MLS, especially early in your career, might be motivation enough for you to get your own real estate license. It’s a critical resource as an investor.

If you must do the searching on your own without the MLS, you may still be OK. I often use sites like Zillow.com for quickly pulling sold and active comps. Its maps and search function are very user friendly, and although it may not be as up-to-date or comprehensive as the MLS, it still has a large number of comps you can use for this quick and dirty estimate.

If you’re going the non-MLS route, let me explain the process to pull and filter comps on Zillow.

The first method is to enter the subject property address on the home screen, press continue, and then click “expand” to take the property to full screen:

PIC 4 - Zillow home page

On the right side of the page, find the list of “Nearby Similar Sales” and click on the link “See sales similar”:

PIC 5 - Zillow filter nearby similar sales

You’ll now see a screen with a map and a list of similar sold comps. Zillow chooses these for you and tells you how each comp is different from your subject.

PIC 6 - Zillow filter sold comps

Using this map, I usually write down 5-10 comps on a section of a deal worksheet that I will use later when I visit the comps in person. The comp section of my worksheet looks like this:

PIC 7 - Comp section of deal worksheet
An alternative method to collect comps is to start on the Zillow.com home screen and click “Buy” in on the top menu bar:  

PIC 8 - Zillow filter - home page BUY button

You’ll now see a map of your given area, plus filters at the top that let you narrow down your comps. First choose only “Recently Sold” in the Listing Type pull down menu:

PIC 9 - Zillow filter - recently sold menu

 

Then choose your other filters, like bedrooms, baths, home type, and others in order to narrow your search:

PIC 10 - Zillow filter menu on map

Whatever source you use (the MLS, Zillow, or other online databases), you want a big list of comps (at least 5-10) that meet some basic filtering criteria. You don’t want every property in town, but you also don’t want to filter so tightly that you end up with no comps.

So here are the first filters I use as I collect comps:

  1. Sold properties: Ideally, I want sales in the last 3-6 months.
  2. Same location: For suburban properties, this often means the same neighborhood. For urban or in-town properties, it might be the same block or district. For rural properties, it might be a certain distance from the subject (<1 mile). This is where the map function in Zillow comes in handy. Most MLS databases allow you to search by a variety of location filters, like distance from subject, school districts, zip codes, census tracts, cities, and others.
  3. Same size: Square footage should be within 15-20% of the subject.
  4. Non-distressed, traditional sales: Unless most sales in the market are distressed or investor purchases, I want to ignore distressed (bank owned, foreclosure, etc.) sales for comparison. I also want to ignore seller financing sales or other sales with unusual seller concessions. Gathering this information is not always obvious, but indications can usually be found in the MLS in the description and in the photos of the property if it’s obviously vacant and needs work.
  5. Same # of bedrooms and baths: Sometimes you can fudge on these criteria, particularly the number of bathrooms. If you’ve used the first four filters and you don’t have enough comps, it might be OK to include 1, 2, and 2.5-bath homes, for example.

Remember, the goal of this step is not to find a comp exactly like your house (that’s almost impossible). Instead, you just want to find a group of comps that share the most common, broad criteria listed above.  

Now that you have a list of filtered comps, it’s time to take the list and go visit them in person. Often, I do this on the same trip when I visit the subject property. In both cases, nothing replaces the experience of evaluating the property on the ground just as a buyer would.

If you’re in your car, be sure to slow down, roll down the windows, or even get out and walk the neighborhood. Get a feel for how a user would experience this property and this location. You’ll pick up many more factors in person than you could behind a computer.

If you must stay behind a computer at this stage, take full advantage of Google Maps Street View to tour the neighborhood. But keep in mind that the images may be out of date. The photos from an MLS listing or Zillow will be another important resource for you if you can’t visit in person.

Related: 4 Simple Steps to Successfully Analyzing a Real Estate or Note Deal

As you look at each comp, take notes on your worksheet. Ask yourself while physically in front of the property if it is better or worse than the subject. And write down why. Be sure to circle or make special note of the 3-4 comps that are most similar to your subject property.

For now, just write down your initial reactions. In step #3, you will use this and other information to get a quick and dirty estimate of value.

Step #3: Compare Comps to Estimate Value

This is the step where all of your previous work comes together.  

If this were not a quick and dirty analysis, you would now make some very detailed adjustments. You would estimate the value of each feature of a house (like a garage, a deck, a fireplace, etc.), and you’d add or subtract from the comps to try to compare apples with apples.

A very good explanation of this adjustment process was written by BiggerPockets author J Scott and is available in the BP Fileplace.

But because this is a quick and dirty valuation, you can be a little less precise. If you need it later, you can do a more detailed analysis or get professional opinions.

Your goal with this process is to achieve an upper and a lower limit of value. You want to discover a range within which your subject property will likely fall.

So, look at the information you collected about the subject property (step #1) and your list of comps (step #2). When you drove by the comps, were you able to identify 3-4 properties that were most similar to the subject?

If so, get a scratch piece of paper and make a chart like this:

PIC 11 - chart with comps

 

Your job now is to think like a potential buyer of these houses. You want to “shop” among your choices and decide which are best and which are worst.

To do this, compare your subject property with this short list of 3-5 comps. On each comp, compare all of the location, lot, and property criteria you have available. Then ask yourself this question:

“Is this comp better or worse than my subject?”

Once you make that decision, in the margin of your chart simply put an up arrow next to a comp that’s better, a down arrow next to a comp that’s worse, and a sideways arrow if it’s too close to call. I also like to put a + or – next to the features that make each comp better or worse.

The chart with analysis might look like this:

PIC 12 - chart with comps and estimate

If you’ve found the right comps that only differ by a few variables, you should be able to make a decision about which comps are better or worse than the subject.

For example, if property A sold for $130,000 but its only significant difference was one less bathroom, you might say the comp is worse than the subject.

And if property B sold for $120,000 and the only significant difference was its poor condition, you might also say the comp is worse than the subject.

And if property C sold for $150,000 and the only significant difference is the larger square footage, you might say the comp is better than the subject.

The example above is simplified for ease of explanation, but the point is the same no matter how many comps or criteria you compare. The process is to continually narrow down the window of estimated value of your subject property by choosing better and worse comps.

In the example, I could say with some confidence that the subject is worth more than $130,000 and less than $150,000. So a reasonable quick and dirty estimate of value could be $135,000-$145,000.

If you are using a fix-and-flip formula to make an offer, you could plug in both ends of your value range to see what number you need to buy at to make your minimum profit.

If you are buying rental properties, you can use this quick and dirty formula to make sure you don’t overpay. You can also build in a discount if that’s part of your rental purchase criteria.

In the end, the entire point of the process was to get you to a rough estimate of value more quickly and less expensively than alternative valuation methods. It will be your job to figure out how and when to use it in your investing business.

It’s All Guesswork (But That’s OK)

You’ve made it through the 3-step process! But before we end, I want to explain something very important about estimating values.

Real estate valuation is always just an educated guess.

Even the best appraiser, broker, or investor in the world can’t perfectly predict the future. And that’s exactly what we’re trying to do.

We’re taking past market information, and we’re projecting that information into an unpredictable future. Markets can and do change very fast.

We’re also dealing with properties that are completely unique. No two properties or locations are exactly the same. So unlike the stock market, where one share of Coca Cola is exactly like another, we’re always comparing apples to oranges to some extent.

That doesn’t mean the valuation process isn’t important or useful. Both our quick analysis and more detailed valuations are VERY important and EXTREMELY useful.

But just remember as an investor to keep a healthy dose of humility and skepticism when it comes to any value estimates, appraisals, and CMAs from brokers. You can’t let this keep you from taking action, but you can build that healthy skepticism into your psyche and into your business systems.

How do you compensate for this uncertainty and still move forward in your investing?

As I recommended above, use ranges of values instead of exact numbers. Make the bottom number something you are very confident in, and then ensure you can still make an acceptable profit at that lower number.

You might also want to have a Plan A, Plan B, and Plan C on your deals. If you can’t get your price, can you sell lower, cut your losses, and move on? Can you rent the property and wait patiently until the market gives you your price?

If Plan A (the optimistic, rosy picture) is the only way you can survive, you’ll get into trouble eventually.

You might also want to build a margin of safety into every deal. Warren Buffett’s mentor Benjamin Graham wrote in his excellent book The Intelligent Investor:

“If you were to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.”

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A margin of safety in real estate means to buy below the true value. But the trick with Warren Buffett or with any of us is that true value is illusive. It’s always an estimate. So building a margin of safety helps to compensate for this lack of certainty by giving us some room for human error.

And finally, never forget to HUSTLE on every deal!

If you’re confident of the after repaired value of a flip, then move quickly, get it fixed up, and take it to market fast before things change.  

Or even if things go badly, keep hustling. Entrepreneurs always make mistakes, including with their estimates of values. I remember many times where I’ve hustled my way out of mistakes and kept moving forward. You can too.

analyze-rental

Conclusion: Go Practice!

The best way to learn anything is to practice. Reading this article is theory. The REAL thing is taking the concept and applying it in the real world.

Related: How I Do My Real Estate Math (Accurately) in Just 10 Minutes

So, I challenge you to go do some quick and dirty valuation of properties on your own. Use your own residence. Use some leads on new deals.

You could even test yourself by using recently sold houses as your subjects. Don’t look at the sold price yet. Just go through the entire quick and dirty valuation process on each property, and then see how closely you come to the actual sold price.

Valuation is not a skill you can master overnight. Appraisers and brokers take years to become experts at this craft.  

But you can become competent with this quick and dirty estimation process. And by applying it strategically and regularly, you can quickly become a value expert in a very small slice of your overall market. You can become the person who knows more about your niche than anyone else.

And that niche expertise will translate as much as anything else into successful real estate investing.

Good luck with your quick and dirty estimates of value! And good luck with your future investing!

[Editor’s Note: We are republishing this article to help out our newer readers.]

Investors:

  • Do you have a quick and dirty valuation process that you use?
  • What steps do you take?
  • How do you get confident in the values of the properties you will buy?

I look forward to having a discussion with you in the comment section below.

Chad Carson is an entrepreneur, writer, and teacher who used real estate investing to reach financial independence before the age of 37. He wrote an Amazon best-selling book Retire Early With Real Estate, and his story has been a featured on Forbes, Yahoo Finance, Business Insider, GetRichSlowly.com, the BiggerPockets Podcast, How to Money, ChooseFI, and more. Chad and his business partner currently focus on long-term rental properties and private lending in and around the college town of Clemson, South Carolina. Their portfolio of 90+ units includes houses, small multi-unit apartments, and mobile homes. In 2003, Chad and his business partner began real estate investing from scratch. They started by wholesaling and fixing-and-flipping properties. They also learned to rely on non-conventional financing sources like private lending, seller financing, and lease options, which remains their expertise today. After surviving the 2007-2009 real estate downturn (with scars to prove it!), they transitioned to more of a focus on student rentals. You can find more of Chad's writing (as well as podcast episodes) at coachcarson.com.

    Keith
    Replied over 7 years ago
    I 100% agree. You can control cashflow, but not appreciation, and you must buy with a profit. You won’t go bankrupt or get foreclosed on if you continuously have more income than expense. Invest for cashflow, appreciation can be an added bonus. Here’s 5 of my investing rules: http://wp.me/p1dbYY-3I
    Arthur
    Replied over 7 years ago
    Peter, I really agree with your post, especially since I am a CA buy and hold investor. My strategy is similar to what you’ve outlined above, but with a slight twist. I only buy in markets where the purchase price is well below the cost of replacement and where I can still actualize monthly cash flow. My thinking is that the cash flow will stabilize the asset for as long as I need it to. Down the road (maybe WAY down the road) when the excessive REO/short sales have worked their way through the system the prices should revert back to the cost of building. This, in my opinion, isn’t really appreciation, but it does provide a nice built-in profit. Thanks for the high quality post. Arthur
    Kyle Hipp
    Replied over 7 years ago
    Great article. I have focused on duplexes for long term rental income. I also try to control the “appreciation factor” somewhat by purchasing a home than needs repair or I can develope a great idea to improve the portperty. With total costs my cashflow is aweful because I am putting money into the property. By purchasing this type of property at a discount I can recoup all my costs of repair and remodel with equity in the property. I also improve the rentability of the property which allows me to raise rents and improve my cashflow. One thing that has helped lately is picking up properties on land contract where instead of using cash for a down payment I can pit it towards repairs and remodels. Then with a great property I can refinance to my pleasing, sometimes with even the option of doing a cashout to some degree. Its so vital to look at the big picture. Anybody can do great when times are good but setting yourself up for success when things go wrong takes it to a whole new level. Great post!!!
    Phil Boren
    Replied over 7 years ago
    Peter – You make some excellent points here. I do think that the answer, like most real-estate answers is, it depends. Here in Boulder, CO, for example, many investors buy with the expectation of a lower return and banking on future appreciation. In fact, many local investors will accept a break-even scenario. By contrast, I know in other markets investors are more demanding about annual cash flows and don’t have lofty expectations about future appreciation.
    Ronald Cagape
    Replied over 7 years ago
    Great post, Peter. In the Philippines, many investors are still married to appreciation especially since the market is growing. It is challenging in this environment to find properties that are way below market that have positive cashflow unless you fork out a significant downpayment. Challenging but not impossible. I do agree though about investing for cashflow. It’s the only thing you can count on.
    Bill Lyons
    Replied over 7 years ago
    Cash flow, cash flow, cash flow
    Frank Rizzo
    Replied over 7 years ago
    There is risk and reward with any strategy, but even in today’s market you can bank on appreciation if you bought right. The key is targeting properties that are under today’s value and project under the current trends. For example, if I am looking at a flip project right now in my market, I take in to account that by the time I able to put the property back on the market, I maybe 3% lower that the current comps. If my purchase price, development and soft costs still leave me margins that I am comfortable with, even with a discount to current market, than I will get involved. Otherwise, I am readjusting my purchase price. Remember, there are no bad properties, only bad prices. Even when you are investing for cash flow, always analyze your equity position every year. It’s not the cash flow that I look at, but the rate of return on the equity that is in the building. If that ratio is off, it’s time to move on to a higher yielding investment.
    Tom Blue
    Replied over 6 years ago
    Peter: I have heard that cash flow is better to focus on from many investors, but look at the billionaires list. They all made their money on appreciation… http://www.forbes.com/forbes-400/#page:1_sort:0_direction:asc_search:_filter:Real%20Estate_filter:All%20states_filter:All%20categories
    Darien Gaston from Lake Station, Indiana
    Replied over 3 years ago
    This is a great article Chad! I love it when you guys give simple practical steps that newbies like me can apply immediately. Finding the ARV of a specific type of home seems pretty daunting to someone who has no experience and no access to MLS listings. I always figured, once I get a lead, I’ll just ask an agent for help, then maybe get an appraisal if it fits in the budget. I’ve recently used Zillow, not to pull comps, but to sort of gauge the activity in certain markets by seeing how many recently sold comps pop up in a given area. I never thought to do a quick analysis on the house I’m currently in now, just to get an understanding of how it’s done. I feel like I now have somewhat of a blueprint to follow.
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Hey Darien, You hinted at my main purpose of this article – to give you a simple tool to practice valuing properties. Knowing values is so critical, but as a newbie the only way you will learn them is to do it over and over. Hiring an appraiser might be more accurate at first, but YOU would not learn it as well as doing it yourself. So I am glad to hear it is helpful for you. Go out and do this on 50 properties, then come back and tell me if you feel more confident as an investor. It’s like weight training for real estate entrepreneurs;)
    Jamie Rorick from Kendallville, Indiana
    Replied over 3 years ago
    This article is just what I needed! We are new to our area and just starting to evaluate property here. This is a great tool to help us feel more comfortable with the neighborhood we are looking into. Thanks for sharing!
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Great to hear, Jamie! Try evaluating as many properties as possible with this process, and you will gain a lot of insight. Good luck!
    Bryan O. Specialist from Littleton, CO
    Replied over 3 years ago
    Great article Chad. Very informative and useful. Thank you for writing it.
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    No problem, Bryan. Happy to Do it. Glad to hear it is useful.
    Marc Jolicoeur Investor from Minneapolis, Minnesota
    Replied over 3 years ago
    Another variable to fine tune your ARV estimate is the buyer concession, or the amount of closing costs that sellers are willing to pay for the buyers. In our area this is very often 3% of the sale price. When I have an agent pull the comps, I ask the agent to look these up in the MLS. When I am doing it myself using solds from Zillow and other sites, I have to guess what it might be so I assume 3% and I will adjust the sale price down accordingly. Another tip is to carefully study previous appraisals of properties you have purchased. That way you can get a good feel about how much to adjust for square footage and how much to adjust for an extra bath, fireplace, deck, etc…
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Both great tips, Marc. Thanks for adding your suggestions.
    Howard Maidens
    Replied over 3 years ago
    Thanks Chad. Loved the article. I am actually looking at two properties currently, and will use this info in my valuation process. I appreciate it when the process is simplified as much as possible.
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Thanks, Howard. Good luck with your two properties. Come back here and post if I can help with the process.
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Thanks, Howard. Good luck with your two properties. Come back here and post if I can help with the process.
    Tomas Chao from Gastonia, North Carolina
    Replied over 3 years ago
    Thanks Chad. What you talked about is similar to what I do. I get to fine tune it now so I can be more accurate. Thanks again
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Great to hear you do something similar, Tomas. Any tips or suggestions you can add?
    Carolina Grace
    Replied over 3 years ago
    Great article! Well written and helpful tool for all of us who need to accurately determine the value of a property. Thank you for the excellent content you always provide. I really enjoy your newsletter and the valuable tips and teaching you provide. Continued success!
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Thanks, Carolina! I am glad the article and my newsletter are helpful. That kind of feedback keeps me motivated! Much appreciated. Continued success to you too!
    Carolina Grace
    Replied over 3 years ago
    Great article! Well written and helpful tool for all of us who need to accurately determine the value of a property. Thank you for the excellent content you always provide. I really enjoy your newsletter and the valuable tips and teaching you provide. Continued success!
    Gianni Laverde Investor from Corona, NY
    Replied over 3 years ago
    Great article Chad. Never thought of using ZIllow to look for comps. Thanks for sharing! Gianni
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Hey Gianni, Glad it was helpful. Yeah – most people talk about Zillow for looking for properties, but I tend to just do quick and easy research there. It’s user friendly. Thanks for commenting! Best of luck,
    Chad Carson Investor from Clemson, SC
    Replied over 3 years ago
    Hey Gianni, Glad it was helpful. Yeah – most people talk about Zillow for looking for properties, but I tend to just do quick and easy research there. It’s user friendly. Thanks for commenting! Best of luck,
    Kevin Fox
    Replied over 3 years ago
    Hey Chad. Awesome post. How to go about estimating values accurately has to be in the top three of questions I hear most frequently. Aside from the wonderfully detailed tips you included in the write-up, there are a few more things that I think may be worth mentioning. 1. Be conscious of how certain factors “drive” value in each neighborhood you work in. A home in La Jolla that I recently ID’d for one of my value-add partners makes for a good example. If you were to comp the home looking at all the factors you listed, you should have landed at an ARV ~ $1.7-1.8M. However, if you take an even closer look, you’ll notice that two story homes were selling for SUBSTANTIALLY more than single story homes with the exact same specs (it’s near the beach, so the Coastal Commision makes it much more difficult to add a second story to a single story home than they do to add square footage to an existing second story; which is ridiculous, but that’s a story for a different day). After taking that into account, your ARV should fall closer to the $2.1-2.2M. That’s a half-a-million which could have very easily gone unnaccounted for by the untrained eye! And, if it did, you could hardly blame them for it. In most neighborhoods here in SD (especially those not so close to the coast), # of stories has very little, if any bearing, on value. So, unless you are incredibly in-tuned to your local sub-markets, you absolutely run the risk of improperly weighing certain factors against others. 2. Make sure you’re calculating your ARV based on the specifications of the propert AFTER REPAIRS (I know; duh! But I can’t tell you how often I see this overlooked). If you’re buying a 2 bed/1 bath property that’s 1000 sq ft, but intend to do an 800 sqft addition which will add a master suite and common area bathroom; use comps that are 3 bed/2 bath and 1,800 sqft. Don’t make this more complicated than it needs to be either. I know the though of valuing some make-believe property sounds intimidating, but try not to overthink it. It’s no different than comping the property as-is, just use the specifications you’re planning to build out to. FHEW! Sorry for that post being much more long-winded than I intended, but hopefully some find the additional tips helpful. Not that your article needed it, as I think it has to be one of the best guides to formulating ARV I’ve seen. I just wish you had writen this years ago when I was learning the process! LOL
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Hey Kevin, those are great tips! Thanks! Your example in La Jolla is particularly helpful. I’m consistently amazed at how nuanced value can be from location to location. That just reinforces to me the importance of really focusing on niches and getting to know little insights – like you did – that can make a lot of money. Cheers and all the best to you!
    Avantika Vishwas
    Replied over 3 years ago
    Its a big article, but interesting. I was looking out for a guide from where I can get the ideas of estimating property. Estimating property is really a big task, in which we have to follow several parameters. Thanks again for sharing the post.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    You’re welcome, Avantika! I’m glad you found it helpful.
    Amanda Cook Accountant from Pleasant Garden, NC
    Replied over 3 years ago
    Yet another great post by Coach Carson. We’re getting started as investors and I love the way you explain estimating ARV in such a way that we understand and know we can do the process and come up with a reasonable result. At the beginning of the article you said: ““Buy low, sell high” is the core success formula in real estate investing, but in order to buy low, you need to know how to evaluate high.” Very well stated!!!
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Thanks Amanda! Glad it was helpful. I have to get it dead simple so I can process it in my own head:) So I’m glad it makes sense to you too. Best of luck with your first deals. I hope this tool will be helpful for you!
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied over 3 years ago
    Very good article! I really like exporting the comp data into Excel and then going through the listings and eliminating bad comps while making notes and adjustements on the good ones based on the pictures, sq. footage, etc.
    Blake Dillard
    Replied about 1 year ago
    Sounds like a great strategy – do you need MLS access to get this data in export-able form though?
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Yeah, I like that idea too, Andrew. Thanks for sharing. If you can get enough comps, then you can really focus in on the few best ones that are easiest to compare.
    Jason Wheeler
    Replied over 3 years ago
    Lots of details here. Great for newbies.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Thanks, Jason!
    Rick Dimicco from Daniel Island, South Carolina
    Replied over 3 years ago
    Great post Carson. Thanks for writing this. It was ironic to read your post since this is almost exactly the process I’ve been using and just last week took the time to document the steps as I tried to incorporate some new ideas and sources of data (like the County website). I agree 100% – “The best way to learn anything is to practice.” As a newer investor I need to keep reminding myself that this is a high level analysis to determine if the opportunity is worth a visit and a closer look. With practice I’m getting faster and hopefully better at it.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Hey Rick, thanks for sharing. That is weird you were working on the exact same thing! Did you have any different steps than mine? Yeah, nothing replaces practice. We’ve got to get out and do it every day. Good luck with your own practice and investing. Mastering this tool will certainly be a confidence booster as you move forward!
    Danny Carter Investor from Los Angeles, California
    Replied about 3 years ago
    Chad thank you thank you thank you for writing this article!!!! I’m really close to pulling the trigger on an out of state flip and this chart combined with the info in J Scott’s book is exactly what I needed to gain confidence in making this deal work. Way to pay it forward bro, hope it comes back 1000 fold. -DC
    Larry Weingarten from Monterey, California
    Replied about 3 years ago
    Hi: I’m a contractor who likes to buy fixers. Perhaps I missed it, but how do you get a number on repairs with this technique? My experience is unless you actually see the home and crawl around, you cannot know what repairs might cost. Thanks for the article! Yours, Larry
    Valli Smith from Rosenberg, Texas
    Replied almost 3 years ago
    I feel like I have finally found the Rosetta Stone to my new real estate business. I’ve been stuck on pause because I haven’t found a real estate agent yet and felt I needed one to estimate ARV. Now I feel confident in running preliminary calculations myself and going to an agent for fine tuning or finalization. Thank you so much for posting this article.
    Chad Carson Investor from Clemson, SC
    Replied over 2 years ago
    That’s great to hear, Valli! I love language learning, so the Rosetta Stone comparison is a big compliment:) Thank you! Good luck with your next steps.
    Adrian Fajardo Rental Property Investor from Fairbanks, AK
    Replied over 2 years ago
    This blog was really educational for me. Not only because of its detailed explanation but also because of the words of wisdom that comes along with it. There is theory and inspiration all in one blog. I know, I’m kinda late since the posting of this blog but can someone help me in understanding something? In J Scott’s tutorial in valuating properties he uses a fixed dollar amount to add or subtract to the comps to get it close to the subject property. My question is, are those values universally accepted regardless of what market you’re in? Example, subtracting or adding the value of $150 for a bathroom? or $200 for a bedroom? Thanks and Good luck to anyone on their journeys in reaching their Goals!
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied about 2 years ago
    If I can get bathrooms for $150 and $200 may I have a thousand of each, please? Markets are absolutely individual — to do ANYTHING in San Francisco takes a boatload of gold, while the same project in rural Siskiyou County costs similar to the midwest. It’s something to be aware of when dealing with insurance companies for “replacement value” – shop around! My parents had a simple 3/2 built with a block grant to HUD standards. The structure cost $100k. Upon completion the insurance company tried to claim that this newly-built house had a replacement value of $160k. They were averaging in all of “northern California”, including the SF Bay metro area where you’d be spending more than $100k in labor alone (plus materials, plus permits, plus liability insurance etc etc etc).
    Chad Carson Investor from Clemson, SC
    Replied over 2 years ago
    Thank you Adrian! Glad the article was helpful. Good question about adjusting values from comps. The short answer is no – those adjustments vary from market to market. You really have to study what buys are willing to pay for in your market. J (and I) also both recommend the 100 property rule. If you study 100 properties, you’re likely to learn a LOT about the local market, including adjustments like these, and you’re also much more likely to purchase your next deal. I also recommend taking an appraiser out to lunch and asking him/her about those types of adjustments in your market. Good luck!
    Abhishesh Acharya Rental Property Investor from Atlanta, GA
    Replied over 2 years ago
    This was great. Thank you Chad.
    Ryan Sanders from Colorado Springs, Colorado
    Replied about 2 years ago
    Another method of getting a list of comps is to use your local title company. I called mine and made sure they knew they would get my business exclusively and I asked them if they had a program they could allow me to use which can pull comps and they gave me a free login. Now whenever I need comps I just login and type in an address. I even made a spreadsheet that I can copy and paste the subject property info and comps info into and it will give my side-by-side comparisons and a weighted valuation of my subject property based on the best comp weighing more heavily than the worst comp. Saves me tons of time as I can get an approx ARV in about 45 seconds
    Peter B. from Frisco, Texas
    Replied about 1 year ago
    Thank you Ryan for the excellent tip!
    Liz Petroff
    Replied almost 2 years ago
    Great article, Chad. W would add that using resources like Zillow are hit or miss in markets located in non-disclosure states like Texas. Sold information, most importantly sales price, can mostly be found using the MLS (“mostly” because some agents actually enter sales date and price on Zillow, Trulia and Realtor profiles). There are definitely agents out there who will gladly run these for investors. As you’ve suggested, it may be worth it for investors to either get their own license or find a business partner that is a licensed agent to gain access to that data.
    Nina Nation from Jackson, Mississippi
    Replied over 1 year ago
    Just what I was looking for…Awesome article!
    Dante Woodson from Charlottesville, VA
    Replied 12 months ago
    This entire article is pure gold !!
    Tyler Dalton Renter from Baltimore MD
    Replied 10 months ago
    What a great resource! Thank you!
    Chuck Glover
    Replied 7 months ago
    Solid Gold! This article was absolutely motivating. Thanks for practical, skillbuilding exercises. May your camel never have fleas.
    Asiimwe Isaac
    Replied about 1 month ago
    This is so good, I love it, Thank You
    Don Taylor from Raleigh, NC
    Replied 26 days ago
    Still great info after all those years