I am looking at several properties in a town that used to be a mining town in its hay day . The housing is so mixed ( value wise) that I am having a hard time coming up with a solid ARV due to the diversity in properties.
They are all older, but still very usable for the area.
Have you talked to a realtor? That would be my next step if I couldn't come up with good comps. Ask around to see what the property might sell for.
Funny that should happen to you right now @Mike Baker ! It's the same issue I've dealt with the last couple days. It can be a challenge to come up with good valuations from inconsistent data.
You didn't mention your strategy, but I would recommend against trying to flip anything in a rural area, unless it is already popular place that's growing in which case, you'll have the comps to support that idea. Without those recent sales, it's just a crap shoot.
Now if you're buy/holding, and you are willing to accept the small pond (market) less fish (renters) longer time to wait for bites (longer vacancies during turnover) keeping some that you would otherwise throw back (less selective screening options) you can still do well and at lower risk due to lower entry price points in those smaller markets. You can use a cash flow method of valuation in that case. Something like, if a 3BR average sized house in a decent neighborhood rents for 800/month, then if you use the 2% rule as your targeted ROI, you would look for properties that you can buy & make ready for under 40k or so. These numbers are for illustration only, your market and your objectives will determine what works or not for you.
@Brian L. is correct talk to a Realtor that know the area, they will be able to give you additional insight on the market. If the area is seeing a turnaround you will see an increase in job growth which will generate more residents moving to the area.
I must assume you are looking to buy and hold for passive income if that is the case you will have to use a higher % to calculate your vacancy rate because of demographics of the community. Lack of movement in a community is a key indicator that the area is dying. Anything that is not productive or moving is dying. You have to figure which direction the community is going.
Flipping is not an option if you don't have comps. If the market is not providing comps should let you know there is not much interest for people to buy and sell property in the area.
Mike you'll want to keep in mind that if any body purchases a property from you with a loan their appraisal is going to have the same challenges to figure out the value. That could be a problem or benefit. If you can find comps to give the appraiser you could possibly benifit. What is your basic strategy for these properties?
Lack of recent sold comps on residential property is a sure sign for you to NOT to attempt a fix and flip in that area, imo....
Buy and hold is the strategy. Smallish town with a highly regarded tech school in it.
Great info. Thanks!
Free eBook from BiggerPockets!
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.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing