How To Determine Price Per Square Foot?

[Cecile Poyet]

Hi fellow investors, 

As I'm running Rental Property calculator analyses like it's my job, I'd love to know: how do you estimate the right price to pay for a property? @Brandon Turner says a rule of thumb is to pay for at least 20% less than what it's worth (that's what he defines as a deal). But how do you know what the property is truly worth (when it's not commercial)? 

In his post, @Chris Clothier even says "We know in each zip code and often by neighborhood, the exact price per square foot that we want to pay. That makes it very easy to make offers." How do you do that Chris? 

Thanks in advance for the additional info. 

[Charlie MacPherson]

@Cecile Poyet I can't speak to other markets, but around here the price per square foot is a non-linear function.  The smaller the home the higher $/sf cost.

I've run hundreds of comps over the last five years and while I do track $/sf, it's so widely variable that it's really not a very useful number.