Hey how’s it going I was wondering are there any appraisers or cash buyers who work with wholesalers that truly know the Detroit market, or one vey similar. What people are actually paying in these neighborhoods, and understand how to comp properties.?.
I don’t want to waste anyone’s time when I send offers.. I’m a wholesaler myself and I am still trying to perfect this aspect of my learning process. I know it’s all too common that most wholesalers submit deals to low or to high based off of formulas that don’t necessarily work for a property or they have received bad advice.
Getting accurate comps in Detroit is almost impossible. Houses that are the exact same on the same block will sell for dramatically different prices.
I’d love to hear a response to this if anyone has advise. I’m looking to comp rentals and find it difficult outside of midtown/corktown/downtown to accurately figure the correct price someone would pay for a unit.
Lots of time and experience helps lol. Maybe not the answer you want to hear, but the truth. As Joe said Detroit can be difficult. Much easier out in the suburbs where the values don't differ 5-100% house by house often on the same block (for the most part).
The good news for non agents is you have access to almost the same data as agents these days. Pick your poison with Zillow, Trullia, Realtor or one of the other hundreds of sites the MLS shares their data with. When I do comps I use 1/4 mile or closer and 120 days or less. The market swings are large in the city so when I am being conservative in my comps, I keep a close, tight circle on time and distance.
Everyone knows about looking for similar size, features (garage or no, basement or no) but in Detroit the condition can not be overrated. You can't compare two identical homes one that is ready for a homeowner to move into with a boarded up one with a 10 year tenant occupied one. The conditions are going to be wildly different and you have to make adjustments for that. By adjustments, I mean guesses at first.
Also, in a low income investment market that is dominated by foreign buyers like Detroit it, there are a lot of factors that go into the decision process and "comps" is simply one. To some, the most important one and to others, couldn't be less important. ROI, IRR, NOI maybe king investor to investor.
Don't worry about offending an agent or an owner. As a broker, I have never been offended by an offer and we commonly get stupid low offers. It takes a second to say "no thanks". Frankly, I feel bad when they take the time to do a PA and provide all of this paperwork I wish they had called or sent an email saying would you consider....but to each their own.
As long as you are making a good faith offer, I don't think many would be offended. We all know what you are doing, it is a numbers game and if this deal doesn't work maybe its the next.
Back to the original question, it just takes time and experience. Look up homes, find ones that match and never pay attention to the Zestimate : ) You are right more often than Zillow : )
Appreciate your responses Joe and Scott...
So here is my assessment and experience.
The market value of the property meaning what it will sell for not what the bank will appraise it runs like this:
Some baseline number that it costs to get into an area. Then the total costs of what it takes to bring it to livable condition or rentable condition. Then tack on 25%
So say you bought a property in East Village for $70K. To rehab the property is $60K So that is $130K. You can sell it on the open market for $162K.
How do you establish a 'baseline'? Well check the prices of Land, Shell Houses, Homes requiring work, and Homes that are in good condition.
Go to the selected neighborhood via Zillow, and look to see what the condition is via the picture, compare the price. Then cross-reference sales in the Detroit Land Bank. To determine the cost of rehab look what the Land Bank says and the scope of work and determine your scope and costs.
Adding to the craziness already posted: we've seen OOS or OOC buyers dramatically overpay for City of Detroit properties because some questionable people sold them cashflow numbers and represented that the properties were Class A or Class B, when in reality they were Class C or lower.
Those type of sales really throw computer-generated value estimates off!
Really interesting information. Thanks everyone
Does anyone know of any CPAs that are familiar or currently work with investors .?
Yes we do