Determine a house's CURRENT value?

Question

Hello Bigger-Pocketers!So I'm a somewhat experienced BRRR investor, doing my first flip! And I'm finding myself a bit lost.

I bought this house off-market. It needed a lot of repairs. I'm close to finishing those, and thinking about what to do next.

I've run comps, and I know what this house COULD sell for. But, aside from all the broken things, I think the house an landscape design really needs to be looked at. What I really want to know is:

1. How much is this house worth RIGHT NOW?2. What needs to change to bring it to it's potential price?

And once I can answer those questions, it'll be up to me to determine which, if any, of the renovations and upgrades are worth it.

And these aren't questions I've had to face before on my rentals. I build them to be sturdy and to last, not for re-sale.

So, how do I go about this? Are there consultants available?

Gretchen Guarino · Answer

Wow--love your detailed analysis. Price per square foot is definitely the best way to look at this . I usually calculate the median and average price per square foot for the neighborhood--preferably within 1/2 mile for urban areas, but you can go 1 mile if it's more suburban or has large lot sizes, even more for the country with properties on acreages.

Then out of the pool of listings that are the same size and have similar features, I do exactly what you are doing and look at listing photos! This tells me which properties are most similar in CONDITION and BUYER APPEAL to my subject. Then you can find the average price per square foot for those.

You can THEN go through the same process for your expected ARV--your finished project. Are buyers spending the money for upgrades???

Michael Roetzel · Answer

Thanks, Gretchen! I have a few agents who I've worked with before, I'll reach out to one. Because I am such an avid DIY'er, I did spend some time getting a little more thorough with my comps. I went through the sold properties in the immediate neighborhood, and looked not just at $ and square footage, but, using the photos on Zillow, ballparked the property's visual appeal. It was a very quick and dirty process, so I'll take my own results with a grain of salt. Then I made a chart using 21 comps.

First, if you see those prices per square foot and think, "that's not upper middle class!"...well, this is Little Rock. :)

Second...there's not much slope to those scatter plots. There is a some slope, but It would take an awful lot more money to bring this property to what I'd consider a 10/10. I don't think I see much return in that. Given that the houses in the neighborhood are were originally well-designed and built, an "8" is what I consider pleasant, no defects in design, and decent quality finishes. Below 8, and there are some noticeable problems in design and/or finishes. Currently the property I'm holding...I think once all the problems are addressed, it's still going to be just at about a 6.5. The question is going to be whether it's worth upgrading from that.

Gretchen Guarino · Answer

By the way, since it's a new neighborhood/price point for you. I would find a realtor who sells a lot in that neighborhood. Who has a lot of signs up in that area? You can also check online platforms for top realtors in an area.

Gretchen Guarino · Answer

Hi Michael, congrats on being near completing your first flip! Most realtors will do a free, no- obligation market analysis. They are hoping to get the listing when you are ready to sell, of course! If you know an experienced, local realtor--give that person a call. I know flippers often don't necessarily love paying commission, but usually realtors are able to sell for higher and help you watch out for potential pit-falls on the way to the closing table. Good luck!

Michael Roetzel · Answer

I forgot to add...one reason this is a new territory for me, as my previous experience has been in working-class neighborhoods. This property is in an upper-middle class neighborhood. A completely different level of expected finish.