Quickly analyze properties "guestimate"

[Christopher Bannister]

Newbie from Philadelphia area looking to purchase my first property in the near future.  Reaching out to anyone with knowledge on how to QUICKLY analyze a property to see if it's worth the investment.  Going back to the old saying "time is money", in my case, its also valuable.  Open and willing to all ideas and strategies.  Feel free to comment or DM, wish everyone the best on all their endeavors 

[David Haynes]

@Christopher Bannister

I agree with what others have said. The 1% rule is a quick rule of thumb that can quickly remove properties out of your way. For instance, if the property is worth $120K after cosmetic updates, it should rent for at least 1% of that ($1200/month). 

But then that brings the questions "How do I know what it will be worth after updates?" and "How do I know what it will rent for?" 

The two questions above could still take you a lot of time to answer. Here's how you can shrink that time as well.

What will it be worth?

I have access to the MLS, but this can still be done on Zillow and similar websites. I pull comps within the area that meet the following criteria.

1) Within a quarter mile (in the suburbs, I may go out further)

2) Within 20% of the square footage

3) Similar or less desirable category (i.e. single-detached, semi-detached, rowhome..)

4) Closed within the past 6 months (maybe further back if there's a lack of comps)

5) Similar or worse condition to what the subject property will be in after renovation

I'm thinking from the perspective of a bank appraiser as I pull comps. Because ultimately the goal is to buy, renovated, rent, refinance around 75% LTV, and repeat.

If your goal is to refinance all your cash out, you want to be all in at 75%. So your purchase price and rehab should be 75% or less of the ARV. For example, $52,000 purchase + $3000 closing costs + $20,000 rehab = 75% of $100K ARV.

What will it rent for?

If you do not have rent-o-meter or MLS access, here's a very quick short cut. Section 8 housing publishes what they determine to be fair market rent within each zip code and for each bedroom count. Even if you aren't planning to accept section 8 tenants, it's still a good rule of thumb for knowing which zips rent for how much without having to pay for a subscription.

Click here to go to the website. This is what you can expect...

Again, this isn't perfect. But it does allow you to quickly determine which properties are worth pursuing.