How would I find the ARV on a property with comps that haven't sold in the last year...

Question

I absolutely LOVE BP... (Had to put that out there)

I found this REO that needs a full rehab... I would like to flip it. The realtor that showed me the property only found two properties, one with less square footage than the subject property and the other with different characteristics (the subject property is a 3/2 and the other comparable was a 3/1 with a 10% overage on square footage. Both of the comps sold over a year ago. The subject property is in a half-way decent neighborhood but I don't have solid comps to come up with an ARV. Additionally, this is the only vacant property in the neighborhood. There has to be something I can do to flip this house but, I don't know where to begin. Any advice???

Aaron Montague · Answer

Account ClosedGo to similar neighborhoods. Just because something isn't within 0.5 miles of your place doesn't mean it isn't a good comp, it just isn't as good as one that is that close.Hit up realtor.com. Go to the property records section. Type in your criteria and see what has sold. I don't know much about Dallas, but you need to :) Start with the closest 3/2s and see what you get. Then drive by those places and take notes.Once you've figured out the nearby neighborhoods, you should have a good idea of what your target price will be. Bear in mind, some places are NOT worth buying no matter how cheap they are. If you poke around and find that this place is only going to sell for 80k, DO NO BUY IT. Running basic math says you'll be negative quickly if you have to do 60k in repairs to it.Also, if this is your first flip DO NOT BUY IT.BUT... can you tear the place down and sell a buildable lot? Might be worth it if you can get the place for a song.

Aaron Montague · Answer

Account ClosedYou are going to have to use what you've got.Ideally you'd have another 3/2 with similar sq footage in the same area in the same condition you intend to flip your property into. Doesn't sound like you do.What sells in that area? If everything in the area is a 3/1 and 5 of them have sold in the last 6 months for $80k, you can probably get at least $85k for your place. Go conservative. Do your ARV on less desirable places and see if the deal is still worth doing.Running comps is NOT an exact science. What is your market doing? Is tanking, is it soaring? Probably not, more likely something in the middle. If the market is slowly ticking up, you can probably get $90k for a 3/2 if the 3/1s sold for 77, 78, 80, 81, 82.Why do people buy where this house is? Big back yards? Proximity to XYZ corp's plant?Bring your numbers here to BP. I'd love to have a lively debate on comps :)

Account Closed · Answer

@mikesedlacek @aaronmontague @billgulleyHi guys... I've been scrambling to find something to help figure out an ARV on the properties I find and they never have solid comps. While I'm putting my numbers together, someone comes along and locks the property up!!! I'm not sure if other investors are writing their own ticket on the property or what. These properties are moving though. Here are my numbers for 2 of the ones I've looked at. After Repair Value 550,000Purchase price 290,000Repairs 120,000Purchase Escrow, Expenses & Property Taxes2,600Total Funds to Purchase and Rehab Project410,000Total Costs & Real Estate Commissions26,000I haven't sent a contractor out yet... I haven't sought out funding yet... These numbers are based on one comp that sold over a year ago...

Account Closed · Answer

@mikesedlacek @aaronmontague I truly appreciate your feedback. I'm going to follow up with the tax rolls and look at realtor.com to figure out what is selling and for how much. I would like to get my contractor to come out and give me an accurate estimate on repairs but I know I can't do that until the property is locked up. I may have made an erroneous estimate on the 60k in repairs personally. I'm going to look a tad bit more into it and I'm almost positive that I'll have more questions tomorrow. Til then fellas!!! Once again... Thanks.

Account Closed · Answer

@aaron montagueHey... Thanks for responding!!! I'm in Dallas and from what I understand, this is an "Aggressive Market" and from what I'm seeing, there is a LOT going on in the REI game here. I haven't learned how to properly assess neighborhoods and see what the activity is within but, from the looks of the neighborhood the subject property is in, people seem to be permanent residents. Nothing has sold for a while in this particular neighborhood. The two properties that the realtor used as comps... One sold for 60k and the other for 100k over a year ago.The subject property needs probably 60k in repair!!! It has a HUGE front & back yard by the way. I don't know how to determine what's selling though. You're absolutely right, there isn't an exact science to running comps but, how do I figure out what to offer and what to sell for with the lowest risk???

Bill Gulley · Answer

Mike, you look within 3 miles initially for comps. The closer the better. +10% is not a primary comp, it might be a supporting comp, 4th or 5th. Sounds like you're trying to make a deal instead of finding one. If you don't have comps, how is your buyer going to have comps? Even cash buyers will comp the subject. That limits the marketability by limiting financing options, if it isn't marketable why buy it to flip? :)

Mike Sedlacek · Answer

Go with the assessment value from the tax rolls. What percentage is assessment on properties in your county? That is a place to start. Look up houses on that same street that are similar. This a free way to start. Otherwise hire an appraiser if you are that concerned.