All Forum Posts by: Steven S.

You are priced at $585/sf, which in Richmond is on the lower-end for the quality of product you have delivered. Also, Avg DOM for renovated properties in Richmond is just under 30 days, and you've been listed for 45 days. This tells you it's the buyers pool slowing down, because you have a good product at a good price, but still not moving.

If you notice, Q2-Q3 is when $/sf values jump, and is when the most transactions occur. If possible, rent it to cover the carry (something Short-term like AirBnB or M2M), and list it April/June to get the most $ back in your pocket

This would be the outlier rather than the norm, but you are not wrong, that is a possibility. The real question is how much this would skew the plotted data.

Currently, I do split the market into the avg high, mid, and low $/sf segments over time, you can see the high-end (renovated/new) product shifts with the most magnitude (across almost every market not just 91324), but this does not represent absorption like you desire, only $/sf:

To research your hypothesis, I would have to:
1) Select a year's worth of transactions (ideally across a 10k+ transaction/year market to be representative, say Los Angeles)
2) Manually review every transaction's photos, marking them 'Renovated/New' if it is, to segment this transaction data from the rest of the transactions
3) Calculate & plot absorption of the 'Renovated/New', and compare it to the absorption of the rest of the transactions
4) When overlaid atop one another, their slopes would reveal the impact you mention in your hypothesis #1
     -If you are right, we would see the cheap houses slope increase heavily Q1-Q4, with the expensive houses slope decreasing Q1-Q4, and vice-versa.

I've run comps thousands of times when underwriting (looking for high-end renovated homes to use as comps) and I have yet to detect such a phenomenon. High-end properties sell year-round, as do low-end properties. Sure, more homes sell Q2-Q3, including more high-end and low-end, so there will be more comps from that time period to pull from compared to another Q.

The algo does not see quality (images/videos/home depot special vs custom builder), but it doesn't matter because during each plotted time-frame, the high $/sf & Close Prices = renovated homes, and the low $/sf & Close Prices = as-is distressed homes, for your entered City/Zip. The market values quality for me, and reflects it in the $/sf, my algos simply reverse that logic. I know as-is condition properties with high value-add potential (especially if zoning changes permit a lot more units) can go for much higher $/sf as well, but again that is the outlier rather than the norm (and any effect this would have would be washed away by the sea of other transactions during that same time period)

TLDR: You are looking at individual blades of grass when I'm in a stadium looking at a soccer field, some blades will be higher than the rest, but nothing of measurable consequence.

You can generate these charts, and many more, for free: app.runcomps.org, enter "your_best_friend" (don't enter the quotes "")

It's no joke, and it's not a lot of analyzing, perhaps you haven't seen my post 'I made LA/Ventura & SF/Bay Area market analysis & sales comps tools you can use' (seems my original post photos are missing, but see the post replies for a thorough run-through)

You, me, everyone can instantly generate these charts with my software tool RUNCOMPS, among other things:

All I did was save a few of the charts generated by the Sales Data radio button at the bottom, and then put them in Google Slides to come up with all this in <15 min.

Were you thinking I sat there, manually scraped this data, cleaned & calculated on the data, then manually made charts for every zip code, and all that?

Not to advocate for a high-crime area, but it should baked into the value already (with good comp selections), something a spreadsheet would accurately reflect?

Depends on the deal, we do a lot of fix and flips so holding them 1 year + means we would be cutting our annualized returns in half (usually 6-7 month projects), and paying needless interest on our hard money loan. On the longer New-builds or MF stuff, it usually takes over 1 year anyways so you get the benefit you mentioned AND then cost seg the improvements to get the most back.

But in either case it seems like buying Q4-Q1 would place you in a better position due to the decreased $/sf value during those periods (at least for the SFV & West-LA markets referenced above).

If you bought anytime throughout the year, you are 50% Investor #1 and 50% Investor #2

Bay Park / Clairemont / Carlsbad / Oceanside are all top-tier markets that fetch top dollar (see the Yellow & Red).

Move your search slightly inland, or further down South and inland, in order to get something done for 1/2 the price, with similar rents (not quite as high, but definitely not 50% less like the purchase price would be)

@Dan Heuschele is right, 2-4 unit is valued off comps not income-approach of value, BUT it is still nice to draw up the terminal-end financials of your project to ensure you are in-line with the sold comps and get used to underwriting deals.

If you just run rent & sales comps for your terminal product (what you'll turn it into/already renovated properties), you can use them to fill in a chart like this. It will help you determine & validate the value on a Avg Sale Price, Avg Cap Rate, and Avg $/sf basis. Take the lesser of the 3 and you should have a solid estimate to be confident in:

If you want to get a glimpse of what the real global players (banks, the fed, etc) are doing/setting up, read The Great Taking by David Rogers Webb: https://thegreattaking.com/

Its the best book I've read all year.

Bummed I didn't get a reply, I'm assuming you all knew this already?

Aside from timing your market properly, do you see how the Los Angeles markets are now inverted, with the absorption-line crossing below the value-line? Value's can't keep going up if there is no buying/selling going on