How to comp a property

How to comp a property

Rental Property Investor · New York, NY · Member since 2020 · 24 posts · 15 votes

I read a post on accurate comping. The author showed me how to make relative ARV comps(comparables) closer to the property I'm analyzing.

He’d take three of the closest comps then find where the comps differ and increase or decrease their value based on the prop he’s analyzing.

Ex. He would calculate the cost of an extra bathroom($1000 per additional bathroom) or additional sq footage into his comp to match the features to the home hes analyzing. For a more accurate comp not just a ballpark estimate.

My question is how did he know how much an extra room would cost or the additional sq footage would equate to? I have a feeling I’d only know these answers if I was an experienced investor. Is there a way for a new investor to calculate these factors into my comps for a more accurate comp analysis. Is there a database or guide that gives a price to each of these variables?

P.S - He goes into deeper detail with home age and garages also being factored in but I feel like if I could Atleast learn the most important stuff like rooms and square footage I'd have a better idea of what my ARV would be. And feel more confident to act without fear.

Please help and thank you for any advice!

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  • Will FraserPro Member
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    5y

    Hi @Joshua Nowell, you've asked a great question!

    There is only one way to know this:  repetition.

    It can be your repetition -- go out and look at a bunch of 2 beds compared to 3 beds, or even better 3 beds compared to 4 beds and find trends in how much value is added IF the only difference is a bedroom.  Repeat with other factors.

    It can be someone else's reps -- take an appraiser out for lunch, ask a savvy real estate agent in your area, or look for a guide made for either of those groups to educate them on this approach to valuing property (which is the comparable sale approach, used by residential appraisers) 

    Repetition breads mastery - this is a great area to start!

  • Rental Property Investor · New York, NY · Member since 2020 · 24 posts · 15 votes
    5y

    @Will Fraser

    I was hoping this wouldn’t be the answer but Atleast now I know the answer. Thank you so much Will. Now I can tell why it’s so important to find an area and know it’s market.

    And even though you didn’t mention them. I figure experienced investors in my market would also be a good idea.

  • Will FraserPro Member
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    5y

    Very true, Joshua!  I have the joy of working with growing investors in my market and it's always a good experience helping people who are zealous to grow and do things with excellence achieve more!  

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