How to know what a property is potentially worth?

Question

Hello!  New to the game.  Made flash cards for every term in bigger pockets glossary, meet with real estate agents, went and scouted properties, met with lenders, read multiple books and articles, listen to podcasts, in the process of setting up a meet with local investors...

One question I’m not seeing very clear is, how do I determine the potential price of a property?  I understand the basic value of adding a bathroom or bedroom.  How to a get comps in the neighborhood?  Is it as simple as finding out what other properties have recently sold for? How do I know adding 15k to a property will lead to 20k (made you numbers) in value?

I guess I’m just stuck on how to find a deal?  How can I show my investor he will get his money back quickly to make it worth his or her while?

I’m sure there is information on this site alone, and I’ve actually read other angles, but something still isn’t clicking for me.  Sometimes hearing other people explain it opens my mind up.

Appreciate any help.

Taylor Hudgins · Answer

Hi Seth,  You are going to be awesome in real estate (the flash cards are super impressive!).  Generally speaking, you'll figure out the After Repair Value (what the home will be worth once it's all fixed up) based on what other properties sell for in that area.

Make sure you compare apples to apples though.  You'll want to only compare the potential deal to similar homes (like comparing 800 square feet homes with 2 bed/1 bath to other 800 square feet homes with 2 bed/1 bath in the same neighborhood) that have recently sold - try to stay within the last 6 months if possible and be as specific as possible when matching.

Hope this gets you started!! Best of luck on your new adventure!

Taylor

Taylor Hudgins · Answer

@Seth Knopp Happy to help!!

Seth Knopp · Answer

@Taylor Hudgins

Thank you!! Very clear tips.  That simplified it for my mind a lot.