How to know, what to prize your house after rehab

10 Replies

HI there guys.

I'm looking at a 1803 sqft house with 3/2 from 1979

Need new roof and Air condition unit, and doing full rehab inside

But how do I know what's the right prize to list after i'm done

I know you need to check out the comps in the neighborhood from last 6 months.

My realtor send me this email with comps in the neighborhood. but there some much difference between them in prize. this what she send me. must say house i'm looking at has more sqft then almost all of them, but also is the olderst from all of them.

List $89.900 Sold $82.000 year 1987 sqft 1691

List $72.500 Sold $62.000 Year 1990 sqft 1552

List $74.900 Sold $70.000 Year 1984 sqft1542

List $65.000 Sold $62.000 Year 1989 sqft1650

List $88.300 Sold $88.300 Year 1987 sqft1741

Current listing $74.900 Year 1988 sqft1692

Current listing $76.000 Year1985 sqft1975

Is there a formula you guys use, or just go from comps in neighborhood? 

Thanks Quint

I would use the lowest comp (sold properties) that she gave just to be on the safe side and I believe they calculate something to this:

ARV (After repair value) $62,000 x 70% = $43,400 - rehab costs - holding costs - your profit = MPP (Max purchase price)

Hope this is acurate (I'm still learning) and hope it helps.

Let me chime in on this. Lets assume you have 5 comps (even if the sold date is missing kinda important part, also I hope these are from the same zipcode as your deal) you want to know your ARV list price. I dont see a year built of 1979 but we can work some numbers close to it. You say your doing a Full rehab ( walls, electric, plumbing,etc). Great it should show well with updates.

All five comp numbers adding = 390,600/5=78,120 avg price  sqft 8,176/5=1,632 avg sqft 

Now 78,120 avg price /1632 sqft =47.86 avg sqft

So your house is 1803 sqft x 47.86= 86,291.58 (bigger home than listing comps) Hmmm:)

Dont get happy just yet, you want this to sell fast for less to limit carrying cost.

Now if you want this to move quickly reduce it by 20% to 69,032, and this should move fast. Granted yours is fully rehabed and curb appeal is done lanscaping with mulch.  

Now if your list it with a realtor make sure you put ( a offer review 5 day period with CTKO clause for high offer purposes). Im sure you will get multiple offers with it being this low and fully renovated rehab. Good luck in Florida they have some great deals down there.

  

D Barkley

First of all thanks for this amazing calculation, really helped me out understanding it better.

Yes those comps are from same zip code.

But just checked out zillow for those sold dates, they almost all older then 6 months :-(

1st comp sold 9/10/2013

2st 11/14/2014

3st 12/31/2013

4st 6/2/2014

5st 6/10/2014

But what I can see in the pictures, none of them looks as nice as I gonna make it, not even close.

So hoping by doing that I get more on my return.

Question what does”a offer review 5 day period with CTKO clause for high offer purposes” means?

Sorry i'm from amsterdam and just moved here, still learning the rules and my english.

And how can you calculate what to offer on a house?

Originally posted by @Shelly Swanzy:

I would use the lowest comp (sold properties) that she gave just to be on the safe side and I believe they calculate something to this:

ARV (After repair value) $62,000 x 70% = $43,400 - rehab costs - holding costs - your profit = MPP (Max purchase price)

Hope this is acurate (I'm still learning) and hope it helps.

I'm not sure I understand how the above value plays into the selling price of the rehabbed home? Can someone explain it a bit more, since what the OP is trying to do is establish an accurate ARV? I thought that was a formula mainly used in establishing the purchase price. And in that case, would it be appropriate to subtract profit, as I thought the 70% rule was there to help ensure you made profit.

I create a spreadsheet with various factors like price bedrooms sq ft, bathrooms, etc the calculate the prices based on $/per sq ft,  $4/ per bedroom, etc. also compare amenities like AC or not. Putting it all in one chart helps me make sense of it all. 

Ned Carey

You maybe wanna share that spreadsheet with us newbies?

First off, run away from that realtor, he/she has no clue what they are doing giving you comps that are over 6 months old. Unless there are absolutely no recent comps, then clearly that was not a good list.

Second, do not use the formula of averages, it is not an accurate means to calculate the ARV. First, homes that are larger will sell for a lower price per square foot (think of buying a 6 pack vs a case, the per can price of the case is less - quantity discount) and vice versa on the smaller ones. Second, that average does not take into consideration manner other important factors, one of which has not been mentioned in this thread - average days on market (DOM). How long it took to sell each house plays a large role. Other factors are condition, amenities, year built, lot size, bed and bath discrepancies, etc.

Comparing and analyzing comps is not just math, but also an art. Go to an experienced person who knows how to do this or start the education process to learn how to do it on your own (which takes time and lots of practice).

@Quint Beniers

You can create it faster than I can up load it. Just put Price, # rooms, Sq ft etc. at the top of columns and enter the data below each heading as you collect it. There are no calculations.

There are a lot of calculations you can do to calculate averages, but who wants to be avarage. 

Just looking at the limited information, if that was my market a fully rehabbed house, assuming these solds were average houses, I would expect to list mine for 99,000 and sell for 89,000-99,000, we never price below the market and our houses sell on average in just under 30 days for the past four years. I would make sure Im profitable at 89,000. 

I suggest finding a few of the top selling realtors for your neighborhood, get an opinion, or three , will get you closer to a real arv then any average calculations you can do, as well as you will find out critical factors to consider, such as, in order to get your price you need to ad an extra bath, etc.

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