What is a good/price for houses?

Question

Hello! So I am looking around at homes (preferably one with 4 rooms 2-3 bath) but since I am 21 and just now getting into the market I am not sure what is considered a good price for a home. All I have known is houses like that to be 400,00+. For example, I saw a a home with the following specs:

4 Beds

3 Bath

Price on Zillow: 575,000

Built 1971

Sq Ft: 2580ft

HVAC Replaced in Last 5 Years

Extensive Plubming with new PVC Sewer Lines Done As Well

Been on Market for 18 Days

Now, I haven't done the math for everything expense wise or gone to this property as I am just using it as an example, but would this be considered a high price? The Zillow Estimates 565,700 but I am not sure what to go off of. Anything is welcome, just trying to get a good basis of what I am looking at or should be looking for.

Thanks,

**Edit**

I am looking to follow the House Hacking Strategy

Cory J Thornton · Answer

@Nathan Hedrick - $500k could be a killer deal for a four bedroom in one area and a terrible deal across town. If you are trying to leverage a property as a house hack, then I would let my target cashflow be what qualifies a good or bad deal.

How much will the mortgage payment be on the home?

How much could you rent your extra rooms for in a home?

If you expanded your search to three bedroom homes, at a similar square footage, than you may be able to add a closet or a window to a space creating an additional bedroom (if the septic/sewer supported it).

Keep us posted on your invested journey, best of luck!

Nathan Hedrick · Answer

Thank you Sarita!

Sarita Scherpereel · Answer

@Nathan Hedrick You need to find an investor friendly agent in your market to work with. They will pull comps for you and run ARV, rental estimates- when that's time. Zillow estimates in my market are never accurate. Especially if the property needs updating. Find someone on BP that you can work with when you're ready. They will guide you through your markets idiosyncrasies.

John Morgan · Answer

@Nathan Hedrick

Crunch the numbers real quick. See what the down payment would be. How much the mortgage will be. Market rent, property taxes and insurance. This is what I do. It takes less than a couple minutes per house. Then I make my decision to explore it more if the numbers work. Your area is different than my area so that might be a great deal. In my area (Dallas) it would be a horrible deal. But your rent is probably 3x’s what I could get here, so it all depends.

Eliott Elias · Answer

You determine a good price based off of comparable sales. I use a formula 70%*ARV-repairs, if this is the case I am closing the deal.

Nathan Hedrick · Answer

Hi Nathan,

Thank you for your input. It was very helpful and I believe has helped me realize the possibilities. I know homes near by (like 10 minutes down the street are selling for a lot more (600-1.2million) range but they are closer to the beach. It will look more into it though.

Thanks again,

Nathan A. · Answer

I completely agree with what @Cory J Thornton said about evaluating the actual deal based on target cashflow. That's what determines whether the deal works for you, in your situation.

As far as determining "what is considered a good price for a home," a "good price" isn't an absolute thing but instead something that's relative to houses that are as comparable as possible. Poke around in Zillow's recent home sales data and you'll eventually start to see patterns. Houses in Location A sell for more than houses in Location B for the same number of bedrooms or baths, and that sort of thing. You'll also start to get an intuitive sense for how much a fourth bedroom or a third bath is worth, and how much fixed-up condition is worth versus houses that need work.

So the first part of it is getting that intuitive understanding for what fair market prices tend to be in your area. Once you have that understanding, you are equipped to start looking for good or great relative value, where you can exploit opportunities the market pricing gives you. Part of this is relative value in the location or property attributes. Maybe there is an area that is available at a discount now but you believe is up-and-coming. Maybe houses that have four bedrooms aren't that much more expensive than houses with three bedrooms, but for your house-hacking purposes that's another whole bedroom to rent. Those are hypothetical scenarios, but you get the idea.

A final layer to it (if you want to attempt it) is getting a great deal on the particular property -- that is, purchasing the property below its potential value given its location and characteristics. Classic ways to do this are to look for properties that need work or sellers who are motivated.

If this sounds like a lot of work to figure out yourself, you can also start working with somebody who understands your local market like the back of their hand. Usually that person will be a good agent.

What is a good/price for houses?

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