Running Comps in a depressed area

[Seth Holland]

Hello Everyone,

I was recently sent a property for sale in a rough neighborhood in Memphis. This is really close to the UofM campus so it definitely has potential to be a great rental. However, how do you run comps on such a house in such a neighborhood and not seem crazy to a lender? The neighborhood is old, crime is higher but not war zone, and a lot of investors are picking up houses. So with all that being said, all the surrounding houses are being sold for 50k or less. The person selling as well as Zillow (i know, don't trust Zillow's estimate) want me to believe the ARV is over 100k. I speculate this area to turn over to near 100% investors fixing up the houses so maybe this house could be worth 100k someday, but what about today? The real question is: am I wrong in thinking the ARV as of today is only 50k?

[Kuba F.]

@Seth Holland I lived in that area for 10 years.  The area is separated into very distinct and highly specific boundaries, with the tracks and Highland running right down the middle so your comps have to fall within those boundaries to make sense at all.  You have to have very specific local knowledge there.  As far as appreciation, the house I sold almost a decade ago is still worth the exact same, so you shouldn't count on it.