How Much Weight do You Give to Price per Sq. Ft. During Acquisition

Question

Seems like every retail deal in my area is selling at $100/ft2....would it be easy enough to say that every property selling at $70/ft2 is a deal...thoughts?

Account Closed · Answer

I don't put much stock in the cost per foot figures. It might be somewhat meaningful for the retail buyer, but even then only if you're comparing identical properties - same size, condition, neighborhood. As an investor, I'm mainly concerned with the cash flow.

Jeff S. · Answer

It is a great indicator for the potential of an area.

Bill P. · Answer

I use the $/sf as a an indicator to flag the property for review. While it means absolutely nothing until you see the condition of the house anymore. It used to work pretty well but since the housing crisis, not so much. Too much crap out there skews the results.

Jon Holdman · Answer

In the same neighborhood and all other factors being equal, larger houses will sell for a lower $/sq.ft. than smaller houses.  It doesn't cost very much to bump out a wall and add 100 sq.ft vs. the cost of the rest of the house.  When appraisers adjust for size their adjustment factor is a third to half of the average $/sq.ft. for the area.

Brandon Schlichter · Answer

I'm buying two houses in essentially the same neighborhood.One is 2850sf for $20,000 The other is 900sf for $15,000I'll make more money on the 900sf deal due to the condition of it vs the larger one, and the market in that specific area.So, I don't pay MUCH attention to it, howecver it does contribute to a final value.

Bryan L. · Answer

@Brandon Sturgill When I do an MLS search, I take the results and sort them in ascending order by $/ft^2.  The lower $/ft^2 aren't automatically a deal, but it makes the search a bit easier.

John Ellis · Answer

@Brandon Sturgill in my area depending on what part of the neighborhood your in you can sell between 90-100. There I set my mls alert for under 60.00 a square foot. That is my first criteria. That does not mean I buy every house under 60 but I do look at every house that falls into that category. It is my first in mt search process on the mls.