in Texas, you have to have a real estate license, or have a hook-up with a realtor to find the comps in areas for what houses have sold for. so clearly, all i have access to right now is just what houses are on sale for. What do you all do? Is anyone else in my situation?
Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
17y
Jason - Jon Holdman hit the nail squarely on the head. If you're looking to buy a rental property, you need to do your homework about the rental market. Then you should take that information, along with data about the operating expenses and financing, and work up your cash flow projections for the property.
It may be a very nice house to live in, but a serious cash flow drain as a rental. It's all in the numbers.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
18y
Get out of the house and go look at 100 houses (inside and out) for sale in your target area. If after looking at that 100 houses you still don't KNOW the value of houses in your area, look at another 100. KNOWING your market is THE BEST WAY to value properties. Comps are only as good as the person pulling them and their reason for pulling them.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
18y
YES! The real estate business is not a stay-at-home and type on the computer business. It is a get out of the house and get your hands dirty business. If you want to succeed in this business, you need to become an EXPERT in your local market. Comps are for newbies and amateurs. I don't know of a single successful investor the pulls comps to determine value. Successful investors KNOW the values in their area.
Real Estate Investor · OH · Member since 2008 · 1k+ posts · 86 votes
18y
If you are planning on getting into this business you should know your target area comps block by block. Comps will change in many area's from one street to another. As Mike suggests, get out and look at the homes that are currently for sale or have just sold. This question has come up many times in the past and I have a hard time understanding why people cannot figure out what a home is worth.
Find a home that you are interested in, look on the auditors site for sale history. Find other homes that have sold recently on that block and what they sold for. Look at homes that are currently on the market and how long they have been on the market at that price. Don't use Zillow or any of those other online tools. Most of the time they are way off.
so, if a neighborhood has only had, say 1 or 2 go up for sale in the past year, how can you tell how much a house is worth then?
this also leads me to another question. how to look at 100 homes, when not even 10 are sold in this "area"? And by area, the thing is - here houses are in the low to mid 100's whereas across the street, they are twice as pricey. Confusing!
Real Estate Investor · OH · Member since 2008 · 1k+ posts · 86 votes
18y
I would look at the auditors site for tax value first. This will give you a ball park. Then look at sales history on the home and several others. Has it gone up over the years or declined? If you can pick up a house for 100K and right across the street you have comparable homes worth 200K, then I would have to assume that you can fix your 100K house up and sell it in the upper 100K range.
I bought a house for 23K and all around it were 60K homes, I dumped a little money in it and now it's worth 64K. It's really not that hard. If you are buying 100K homes in a 200K neighborhood, then that sounds like a investors dream neighborhood. The other thing to keep in mind is are people not listing homes for sale or are there homes for sale and their just not moving at their asking price? Big difference..
well when i say across the street, it is in a whole different (gated) sub division. In my area - 109-150k homes. Across the way ... who knows ... 200-300k.
The problem for me is, how do we chisel out what it falls in 109-150k. If I buy at 100k with my sights on it being a 150k home, and it turns out to only be 110k - thats a big difference.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
Thats why you have to go look at lots and lots of houses. At the very least, go drive up and down every street in your target area. Look at all the houses you can. Eventually, you'll get to 100. If your area is small, and the houses are consistent (i.e., variations on the same floor plan built by the same builder), then it won't take as many to see the pattern.
Real Estate Investor · OH · Member since 2008 · 1k+ posts · 86 votes
18y
"Across the way" doesn't cut it. Across the way from my 64K is 200K homes and 15K homes. You have to compare on the same street and block if you are talking about a city environment. Rural is another story.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Originally posted by "Wheatie":
Thats why you have to go look at lots and lots of houses. At the very least, go drive up and down every street in your target area.
Better yet, park the car and walk the streets, you might even bump into someone that knows someone that wants to sell that hasn't listed it with a Realtor. BINGO - get to the seller before anyone else.
Also when you walk you get to look closely at the houses, when your driving you usually won't see that crack in the foundation, but when you walking and your looking over every detail, many times it will jump out at you.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
Dividing lines aren't always obvious. In my farm area, there's very major through street. Its all commercial on that street, and a lot of its pretty rundown. Its influence covers a block or so on either side. A quick pass through the area, and you'd think its a dividing line.
In reality, its not. Houses to the north or south of it sell for similar prices for similar properties.
Five blocks to the north is another street. A fairly major street. A few commercial buildings. But, really, its looks pretty much the same on both sides. It actually is a dividing line, though. The same house on the north side will sell for $10-20K more (we're talking $75-150 range for this area.) It took a fair bit of driving and looking to realize that.
There's one neighborhood where the building had some design issues. You can count on foundation movement and cracked walls. Maybe not every house, but if not, you're lucky and not vice versa.
That's the sort of info you'll get if you step away from the keyboard and go have a look.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
18y
It's only confusing because you haven't done it. The question is whether you've got what it takes to be successful (most people do not). If so, then stop typing and start looking at houses.
Real Estate Investor · Washington · Member since 2008 · 22 posts · 0 votes
18y
There is a company in my area (DC) that does comps for $. I pay monthly for them to pull a max of 50 comps a month. However, you still have to know the area.
Real Estate Investor · Washington · Member since 2008 · 22 posts · 0 votes
18y
http://www.getcompsonline.com/
They have a deal where you can sign up for 30 days for only a buck. They serve Maryland, Washington DC, Virginia, West Virginia and Delaware. Check with them for the rest of the prices.
Real Estate Coach · Atlanta, GA · Member since 2008 · 80 posts · 5 votes
17y
You've located the property that you are potentially interested in purchasing, have looked at it, and determined that it meets your basic investing goals. Before you pat yourself on the back for a job well done, you need to establish its value to avoid potential financial disaster. If you take the word of the seller or the county tax rolls to establish its value, you could lose your shirt, especially in a real estate market that has seen values drop by tens of thousands of dollars within a matter of months.
Depending upon the kind of investor you are you'll utilize one of the three methods of establishing the value of a property. They are:
Comparable Sales – If you're investing in primarily single-family or multifamily properties with fewer than five units, by far the most popular method of establishing value is the comparable sales method. This method consists of locating recently sold properties that are substantially similar to the one you are considering purchasing and are located in the same general vicinity. A skilled appraiser typically has many years of experience in determining value, but you can do the same thing either by going to your county courthouse and compiling the information yourself or by working with a realtor who might be willing to provide these figures to you. You can also get a rough estimate of values in many areas by utilizing an on-line resource such as Zillow.com. Once you have your comparable sales figures you’ll need to compensate for any differences, such as the lack of a garage, fireplace, or even a swimming pool. In order to compensate for the differences in square footage of your subject properties, you can divide the sales prices by the square footage of living space to come up with a cost per square foot.
Replacement Cost – While not nearly as popular as the Comparable Sales method, another way of determining the value of a property is by estimating what it would cost to re-create the same property in the same area. You would need to determine building costs, the cost of materials, and also make allowances for depreciation of the property so that it is substantially similar to the property you are considering purchasing. If you're experienced at estimating building costs accurately and are aware of the current cost of building materials and supplies, the replacement cost method may be one which you will want to utilize. However, it isn't utilized very frequently. If the Replacement Cost method is one that you'd like to use to determine value, you could very quickly arrive at a figure by contacting a local contractor and asking them how much they would charge you by the square foot to build a home in the area of your subject property. Don’t forget to factor in depreciation to match the condition of your subject property.
Income Valuation Method – The third method of determining the value of a property is to use the Income Valuation Method, sometimes referred to as the Net Income Approach. This method is used to determine the market value of a commercial property or a residential property with more than five units. It’s a relatively simple process. First, determine what the gross income is for the property and then subtract all expenses, including debt service on an annualized basis. Multiply that figure by a factor of ten. The resulting number is about what your property is worth. What’s nice about this sort of property is you can increase its value simply by increasing its net income, reducing operating expenses, or both.
Once you’re able to determine the value of a property you can write an intelligent offer that doesn’t cause you to run the risk of overpaying for a property. Remember, though, that real estate prices are extremely volatile right now, so make sure any properties you use for comparative purposes are recent sales figures. If you have accurate numbers, you can write impactful, precise bids that stand a greater chance of being accepted and allowing you to turn average returns into explosive profits.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
17y
Of course, determining the current market value of a house doesn't tell you whether it's a deal!!! In fact, paying market value for a house will just about guarantee that you will fail as an investor.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Market value is important is you're doing fix and flips. And might matter if you're getting a loan.
If you're doing rentals, local rents are more important to determining the quality of the deal than prices. Price vs. rent determines if you can do rentals in the area or not. Some areas just don't support rentals.
Appraiser · Kissimmee, FL · Member since 2008 · 28 posts · 1 vote
17y
Jason, you can call around to some appraisers, they will probably pull comps for you for a small fee right now. If you affer to take them out to luch they will probably let you pick thier brain about the market.
By the way, Get an appraisal for your 1st one especially!
Rental Property Investor · Southport, CT · Member since 2008 · 160 posts · 137 votes
17y
Jason - Jon Holdman hit the nail squarely on the head. If you're looking to buy a rental property, you need to do your homework about the rental market. Then you should take that information, along with data about the operating expenses and financing, and work up your cash flow projections for the property.
It may be a very nice house to live in, but a serious cash flow drain as a rental. It's all in the numbers.
Real Estate Investor · Oroville, CA · Member since 2008 · 107 posts · 2 votes
17y
comp it
come up with your low side figure for value cut that in half and don't exceed that amount when making an offer.
I will not pay more than half price 50 cents on the dollar ARV in this market and I have no trouble getting deals.
I know a few investors local to me who buy homes for more than I do, then ask me how I buy em so low.
Duh it's kind of self explanatory...........if you getting all your offers accepted your offering to much. If your not getting offers acccepted your offering to little.
Where do you want to start this learning curve.....I think I'm far safer offering to little than too much and gettting no property then raise my offers some until I start to buy some.......then dial it in until your buying just right.
And goldilocks said this offer is just right
the bears would have eaten her if she started with the offer that was to high.
She would have been safe if she started with to low an offer.
determine rents for comps in area
If it will not cash flow income covering all expenses plus what you consider an acceptable margin, dont buy it even if its 25 cents on the dollar.
If it for some reason dosen't sell you can still rent it to cashflow
Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
17y
I always buy with a worst-case scenario view, as in, if I can't sell it does it have terrific cash flow?
If it does you have these options: you can sell it to someone at market and make money, you can sell it to an investor looking for cash-flow and make less than market, or you end up keeping it and have excellent cash flow yourself.