Comps - AI fails - do it the old fashioned way?

Question

Hi there - first time poster, long time lurker. We are starting out with our real estate journey and want to focus on multi-family BRRRRs (I know - real original! lol). I have been using AI (ChatGpt) to try and determine ARV for the properties we are looking at, but by and large the data is wrong, hallucinations, etc. Is there a reliable AI tool any of you use or is it best to do it the old fashioned way by scouring listings? Thanks!

Sheryl Sitman · Answer

@Ross Barr Listen to @Alan Asriants -- his guidance is spot on.  AI can help you a lot but it can definitely mislead you in this particular type of use - unless you actually build a tool that can pull the actual data from reliable sources. I've been in the Philly market for 10 years and would caution you that if you are not super experienced -  get guidance. The current RE market in general, is not a forgiving one and Philly has lots of complexities to it.  We've built several tools that we share for free. But I'd also urge you to get some paid assistance and learn from someone's in depth experience. Not to mention to prep yourself for being an owner and housing provider in a highly regulated town.

Alan Asriants · Answer

The best way to get the most accurate comps is to talk to a local agent or investor that really know the area. While AI metrics, zestimates can be accurate in some cases, they can also be extremely inaccurate. I beielve Zillow tried buying houses using the Zestimate and ended up going negative because of it.

The reality is that comps are not always so cut and dry. The easiest comps are cookie cutter subdivisions, but if you are working in a unique City like Philadelphia, you need to be extra careful.

Philadelphia is very block by block. In fact, you can have incredibly different property values for similar square footage within the same ZIP Code of the city. Having someone who is knowledgable in the area can save you a ton of money/mistakes.

There in fact, a lot of lenders were pulling out of areas like Philadelphia and Baltimore, because of reported scams when appraising property values. A quarter of a mile difference can make a huge impact to property value in these kinds of cities but if you look at it from an appraiser standpoint a quarter mile is not that far and in some cases appraisers use up to a mile to try to get value.

Reach out to a local professional - thats the best way...

Michael Dallas · Answer

Hey Ross great post! As someone who has continually used AI to experiment myself I feel your pain. Chat GPT and other LLM are only as good as the data/prompt you give them. In my experience sitting down and being extremely detailed about everything I want and how I want the information to be sourced and given back to me is that best way to get what you want.

You can also combine the new school with the old school. Talk to realtors or brokers and get all the information about properties, costs, location and things that you will need. Then you can upload that information into ChatGPT so that it has a better data to pull from. At the end of the day AI is only as good as the quality of prompting and data you provide. Hope this helps!!

Nicholas L. · Answer

@Ross Barr

are you looking on-market?  the toughest part of BRRRR tends to be sourcing BRRRR-able deals, not running comps.  you just have to be very, very conservative on comps, because that's what appraisers will do.  but comping a property shouldn't take you very much time.  and in general BRRRR-able inventory is found off market.

hope this helps

Andrew Postell · Answer

@Ross Barr I can't tell what state you are comparing but some states (Like Texas) the information is private.  You have to learn how to do it on your own.  That's the only way to make sure.

Ross Barr · Answer

Thanks for this, Andrew. I appreciate the advice. I am in South Jersey, so looking at South Jersey and Philadelphia. I certainly plan to do the work myself to audit the AI, but there are some great tools out there that can save a bunch of time. I looked at several this weekend, and I have landed on RealAI, which is an incredible tool. Dave Meyer mentioned it on his podcast this week, and he was right!

Theresa Harris · Answer

Do it the tried and true way...not with AI.  Work with a realtor who works with investors and they should be able to answer some of your questions.  See if you have a local meet up where you can go and talk to other investors and hear what they have to say.

Kenneth Garrett · Answer

You always need to verify everything especially with AI.  It’s not your super hero, but another tool to use.  You still need to run comps and compare apples to apples.  You can say this with all information.  You’re trying to confirm your results with multiple data sources.

Comps - AI fails - do it the old fashioned way?

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