I screened 2,105 San Antonio listings against the 75% rule. Two cleared it.
I do this every week in a different Texas market and post what comes back. This week was Bexar County.
The screen: every active single-family listing between $80,000 and $300,000, at least 1,000 sq ft, built 1950 to 2010. That is 2,105 listings. One test on each - purchase against 75% of ARV, less repairs, less closing costs. Then again at 70%, because that is where a first-timer actually funds.
ARV came from closed sales inside each property's own subdivision, held to +/-20% of the subject's square footage and +/-15 years of its vintage. Under three matched sales I report no ARV at all rather than a bad one. No ZIP averages.
Results:
44 fix/flip candidates carried forward, 25 with enough comps to value. Two clear at the seller's asking price at both 70% and 75%. Four more are within $20,000 of clearing at 75%.
The rental side was the surprise. 181 listings carry a Tenant Occupied disclosure. I comped the 32 cheapest per square foot; 22 had enough sales to value. Every single one misses at both advances. The closest is $53,625 short at 75%. Same answer I got on 325 of them in Harris County last week.
Three things I took away from it.
1. The widest spread on the board is not the best file. It had four comps and needs a finished value slightly above the best sale that street has produced in twelve months. The file I would actually buy has 48 matched closed sales behind it, has sat 120 days, and is about $7,000 short of the number. Sort by margin and those two land side by side looking identical.
2. A low price per square foot often just means the house is oversized for its street. Several of the cheapest per foot on the whole board fail by six figures, because the finished value their size implies is not what the subdivision pays.
3. My closing cost assumption was wrong and I had been carrying it as a percentage. Three percent on a $90,000 purchase is $2,700. Actual is closer to $10,000. A percentage understates worst at the small end, which is exactly where the thin deals are. Re-running the board on real numbers took one property from $3,447 of room at 70% down to $946.
The occupied-rental result is the one I keep chewing on. Two markets in a row, and not one tenant-in-place listing clears. The explanation I keep landing on is that a rented house is priced as a finished product - somebody already did the rehab, placed the tenant, and priced in the outcome.
For those of you buying occupied rentals off the MLS: are you getting them to pencil at list anywhere, or are you all buying them off market? And if you are getting them at list, what am I missing in how I am valuing them?