Kind of in a predicament here. I'm running comps on this property and I'm seeing stuff all over the place in terms of price. I'm trying to get an ARV for this property but I'm getting stuck on what it could be worth once its fixed up and I usually never have a problem with this. House is a 3 bed / 1 bath at about 1000sf and it's on a 7,200sf lot. I plan on having the house have an open floor plan, granite, updated flooring, new windows, adding some curb appeal - the works.
There's properties in the neighborhood selling from 30k (absolute dumps) to upwards of 175k (same level of rehab but 100+ days on market). And then there's middle grade properties going for around 130k (good rehabs going for list price in about 1-2 months on market).
I don't want to be too optimistic and assume I'm going to get it for 175k but at 130k the deal doesn't work.
Can someone help me out with a comp?
(a lot of the houses that are around 60-75k aren't in good shape. Think of those as mid-grade rentals)
If the comps support 175K ARV by those upgrades you mentioned, then you can be optimistic because they're obviously selling for that price. If you can't make the deal work at 130K maybe come up a bit if you think it could command more than 175K ARV, if not then move on and look for another deal.
@Ryan Johnston , how anomalous are the $175k properties? Was there just one or a bunch over the last 6 months? You could always run your numbers at 5-10% below that ceiling and also factor in the additional carrying costs. See how the numbers work that way.
If the vast majority of houses are selling in the $130k range, you may have to accept that's just where the market is and pass on this deal...or get a better price...
Make your adjustments for:
Year built, Sq Footage, Baths, Half Baths, then start diving into condition. You should be able to dial that in quite a bit.
I do think the comps support 175k. There's 6 sold properties that are either new or extensively rehabbed selling at 168k+. As another plus, there's currently 2 properties that are pending at 199k that were rehabbed but built in 1925. From what I'm seeing the houses that I'd consider as mid-grade rentals are running at 75k and the nice houses that are flips or new construction are running at 168k+
at 160k this house is a grand slam... But I'd be happy with this house selling at 145k
When this happens to me you have to tighten up your criteria. Narrow the search area to that specific block if you can. Also, only count comps with similar layouts. Maybe bungalows are hot in your area which is why they sell for more even though they are identical in sq ft to other homes.
Days on market is very important. Using the search you already did, consider the homes that have less than a week or two on market. This price point is where the greatest demand is, hence the quick sales.
Hope that helps.
Hi Ryan, that's great you are doing your due diligence finding good comps. Once you order the appraisal with the scope of work you are at the mercy of the appraiser. Many times borrowers overestimate how much the property will be worth after their repairs. It can be very expensive with the cost of an appraisal nowadays.
@Ryan Johnston at this point it's probably not a bad idea to call your agent and go walk through the active comps looking at fit, finish, styles, etc of the rehab. Walking through sold comps is a challenge, but take a closer look at the entire spectrum of sold comps. When you examine all the sold comps and compare each of them you will likely see some commonalities within the individual price ranges. This will also help you make the right decisions on your rehab scope of work.