General Comps and Rehab Estimate Question

2 Replies

Hey BP,

In order to evaluate whether or not a rehab (fix and hold) is worth the money, it seems there are two sides to the equation:

  • Evaluating what the property will be worth after rehab
  • Evaluating how much money it will take to get the property to the after rehab state

And using those numbers to work backwards to an offer price that would make sense for you. I have vague notions of how to do each, but nothing at all concrete. To break it down as I see it:

I know that ARV is determined through comps, but that said, it's my understanding that really the only effective way to get comps is if you're a realtor (or through a realtor) as most past sales on zillow, etc. are outdated or incorrect. So this isn't too much of an issue if I'm working with a realtor, but the issue I see is: most good deals never make it to the MLS, so how can I do this when working through a wholesaler?

To address the other side of the equation, really the only idea I have is to actually ask the listing agent or the wholesaler. I could bring a contractor to the property to help in the estimation process, but again that's more money up front. I'm not opposed to spending money to do my due diligence, but if I can filter out certain properties before I get to that stage, I'll save both time and money.

What do you rehabbers out there do? First before you get out to see the property, then once you do your drive by?

Thanks!

PS: I haven't bought J Scott's book on rehab costs yet, though I plan to in short order.

Regarding "it's my understanding that really the only effective way to get comps is if you're a realtor (or through a realtor) as most past sales on zillow, etc. are outdated or incorrect." I'd say that historic saes data from zillow is mostly accurate. It's the zestimate number that seems to frequently be significantly out of whack. 

The "best" way to get "comps" is to get an appraisal. Of course, you probably don't want to pay an appraiser for that service. So... Educate yourself on the How/What/Why of property valuation. You can: Buy a property appraisal book and study it to the Nth degree; Take an appraisal class from a community college; Get the forms and learn where and what data is important; Become a licensed appraiser. That's 4 things that you can do to get you ahead of (more knowledge than) the people you deal with. Pick one and GO!

Originally posted by @Chris Martin :

Regarding "it's my understanding that really the only effective way to get comps is if you're a realtor (or through a realtor) as most past sales on zillow, etc. are outdated or incorrect." I'd say that historic saes data from zillow is mostly accurate. It's the zestimate number that seems to frequently be significantly out of whack. 

The "best" way to get "comps" is to get an appraisal. Of course, you probably don't want to pay an appraiser for that service. So... Educate yourself on the How/What/Why of property valuation. You can: Buy a property appraisal book and study it to the Nth degree; Take an appraisal class from a community college; Get the forms and learn where and what data is important; Become a licensed appraiser. That's 4 things that you can do to get you ahead of (more knowledge than) the people you deal with. Pick one and GO!

 Chris - all good suggestions, thanks. I've actually had the thought of becoming a licensed appraiser before. It's certainly not necessary but I think could be beneficial for me at this stage.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you