I joined a service that will give me MLS data and so now I have access to this info. But how do I start learning the details? I understand that I have to make adjustments to comparable houses for an extra bedroom or bathroom for example and I understand the math, but how do I determine what a bedroom, bathroom or extra square footage is worth? Are there some general guidelines I can use to start my studies? Maybe a bathroom is worth some percentage of the ARV? I'm looking at homes in Richardson, Plano, Garland areas for now. Can someone with experience in those areas give me some pointers?
@Brandon G. I am farming the Richardson ISD. What I've found is that, for most of the SFR in Richardson, square footage correlates very reasonably to bedrooms. (i.e. You don't find many 1,100 sq ft homes with 4 bedrooms.) As a result, I've not found much need to adjust for bedrooms. Bathrooms are a little different, but you don't find many homes in Richardson with 3+ bedrooms that don't have at least 2 baths. So, I generally give it about $5k for an extra full bath, which really isn't enough to make a huge difference one way or the other. It's pretty much a straight price/sq foot calculation.
Basically, if I have a house that's 2500 sq ft, 4/2/2 and one that is 2200 sq ft, 3/2/2, I'm going to do an straight price/sq ft comparison, since the additional bedroom is accounted for in the extra 300 square foot.
That's my approach. I'd love to hear if I'm wrong!
Great question @Brandon G. ! This is the crux of SFR investing in any market. Until you understand how to accurately come up with what a property is worth, you won't know a good deal when you see one!
@Hattie Dizmond offered some great pointers that will serve you well.
The things that can throw you a curve ball are when a property has an addition that makes it more than 10% or more of a difference in living area than other properties in its immediate vicinity. Or if someone is using comps from the other side of a major dividing line of property values like a major road, RR track, or adjacent subdivision. That situation can make a house on the other side of a fence a bad comp as opposed to houses two or three streets away.
Those are the "know your market" factors that you have to get right, to get the values right.
The MLS service you mentioned sounds interesting, would you be able to share more details in a pm?
@Hattie Dizmond Thanks again for your the great info! How about lot size? A spreadsheet I downloaded asked to assign my guess for the price of an acre and it adjusts lot sizes based on that. Do you adjust for lot size and if so how do you calculate it? Also, what about things like a pool?
@Robert Leonard Thanks for the additional info. The point about a dividing line makes a lot of sense. I realized this when I was playing around with comps in my neighborhood. We live in a customer house but just a few streets over are some Fox and Jacobs track homes. There is no clearly defined dividing line such a main road or RR track, but the cost difference between the homes is probably about $20,000, which would really make a difference. So knowing the neighborhood is important for sure.
In my last post, I meant custom* house not customer house.
@Dinesh Babu PM sent.
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