Running Property Comps
One of the most integral parts of your wholesaling business is making sure you are evaluating potential properties accurately. If you mess up on this you’ll either wind up losing money or making less than you could make. In this coaching call, you’re going to see a walkthrough video demonstration of exactly how to run the numbers, using comparable sales and comparable property square footage – and you’ll be able to do it without access to MLS. You should watch this one over and over until you can get this done quickly and confidently.
You don’t need access to the MLS to run property comps. Click To Tweet
When you are analyzing a potential purchase so you know the maximum offer you can make to a seller, you need to be able to compare the home, in its present condition, to like homes that have sold in the area. You can do that using Zillow and Redfin. It’s not that difficult but you do have to know the steps to take, which is the purpose of this screen-share demonstration. You’re going to see a real-life property being analyzed and can watch every step as it is done.
Condition is everything when assessing a potential property purchase. Click To Tweet
If you know how to run comps on a basic level but don’t know how to assess whether recently sold properties were in the same condition as your prospective property, you’ll get yourself in trouble. On this demo, you’ll learn how to assess the condition of comps as well as the price per square foot so that you don’t make a huge mistake. If you learn and follow the steps you see in this video, you’ll never miss when it comes to offering the right amount for a property.
You’ve got to leave enough meat on the bone for your buyer to make a profit. Click To Tweet
It’s tempting to think in terms of selling your property based on an estimated after repair value you’ve gotten from running comps. But you have to keep in mind that YOU are not going to be selling the property for that amount, YOUR BUYER is. So in order to guarantee that you will always have buyers for your properties you need to consider their profits in your calculations. Don’t know what they need to make or what it will cost them to make the deal happen on their end? Find out in this video demonstration.
As you evaluate potential properties it’s important to keep the surroundings in mind. Click To Tweet
In this demonstration video, you’ll see that some of the possible comparable properties are separated from the subject property by a major highway. Did you know that you shouldn’t use properties on the other side of a freeway as comps? It’s true. Do you know why you shouldn’t? Make sure you watch this demonstration. It’s going to show you why it’s a bad idea to take comps that are separated by a physical boundary like a freeway and what you need to do in order to assure yourself that you’re getting the most accurate numbers on comparable properties.
Outline of this great episode
- [0:01] A live, real-deal analyzation of a property to research comparable sales.
- [3:30] Verifying square footage with the county website.
- [4:48] Finding similar listings and paring it down to find the best comps.
- [10:33] Why Redfin is a helpful site to use.
- [14:00] Considering the profit your buyer/flipper will need to be able to make.
- [20:50] How to do your evaluation in light of surroundings (highways, etc.)
- [26:00] Figuring in your costs – closing costs, etc.
- [28:00] Why you want to be 10% below the average comps.
Resources & Links mentioned in this episode
The Monday Mindset & Wednesday Wisdom calls are group coaching calls included in the REWW Academy. These live calls are hosted bi-weekly by Justin Colby and Pat Precourt and cover a specific topic each session – ending with live Q&A at the end of each call.
These calls are designed to empower students to be effective entrepreneurs, creating business that thrive and make money through real estate investing. Students are encouraged to attend the calls and bring any struggles or questions they have about business or real estate.
The REWW Academy program combines our complete suite of software applications with our personalized coaching and a community of like-minded entrepreneurs to provide you with the most comprehensive real estate investing program available.
If you would like to learn more about the REWW Academy, attending these calls live, or learning fast effective ways to get involved in real estate investing, go to academy.reww.com and follow the link at the bottom to apply today.
Below is the full transcription of the Running Property Comps Wednesday Wisdom call with Justin Colby.
Justin Colby:
All right. Today, we are going to go over running comps. We are going to be using two websites. We are going to be using Zillow and Red Fin, and as long as you guys can hear me and see me, we are going to get going. I’m going to take myself off the camera, and we are going to start with the screen share. Hang tight.
All right. All right. Now that we are on screen share, Mark Boyd got MLS access. That’s awesome. If you have MLS access, that is obviously the main way to go. I’m going to be teaching everybody, that way it’s not just people who have MLS access, how to run these comps. Make sure you guys tell me that you can see my screen. It’s Red Fin. The property is 3249 East Winrose Drive. Let me know you guys can see my screen. Yep. Right on. All right. Cool. Cool. What I’m going to do is actually this is a real deal that we actually are doing right now. As you can see now I’m in Podio. This is a real deal. This is the address. This is the seller, the phone number, and here are all our notes. Right. My acquisition manager actually ran it through the MLS. He did comps through the MLS. Here’s the MLS link, and I can actually even open that for you guys here, so that you guys can see what our MLS link looks like.
You’re going to see under contract. There’s two. There’s seven closed. This is in the last three months, so you can see a whole bunch of different information. What the lists were at. What they closed at. You can see sales price, list price percentages, list price per square foot, which is going to be very important. You also can see the sold price per square foot. This is all very, very important. Now again, I bring this up so you guys can see what an MLS comparable market analysis would look like. Here are the ones that are under contract. Three bed, two baths, square footage. One is 2,000. One is 1,700. Built in the seventies. Right now, if you look at our property, our property is 1768. It was actually built in 1973. If you can see that up here in the top corner. That’s where it’s built. Let’s start with this. Let me start with Zillow.
Zillow, if I got to Winrose, I’m just going to look up my property at Winrose, and then here we have it. This is what it looks like if I look up my property Winrose. The estimate says it’s 277,000. I don’t pay too much attention to that initially. What I’ll do is I’ll actually scroll down here, and I’m going to start to go for … I want to see property tax history. I want to see if it’s been sold before, when the last sell was. Per this, it says the last sale was in 94. It sold for 84,000 dollars. We are knowing a little bit more. Here’s similar homes for sale, which is a good thing to look at. We are going to get there, but I will go up here, and I’ll go to actually the county’s website. The reason why I want to go to the county website is because I want to make sure that the information that I have in Zillow is actually what is correct in the county’s website.
Typically, I will look at lot size and then most importantly for me is I just want to verify the square footage. Right here, living are 1768, so we are all good. That is verifiable. I’m good to go with the county assesses office. That’s a huge component for what I like to look at with Zillow. If I go in here, you see here it’s all verifiable. 78. Then I scroll down a little bit. I can also see similar listings, but what I want to be able to do … Similar listings in a new tab. Then I can see the whole map of all the similar listings. That’s a huge amount of listings, a huge amount of closings. I want to whittle that down a little bit, but I know if I actually just scroll up, I do it two ways. If I close this, you’ll see the properties right here. If I go out on the map, you have a bunch of different properties here.
I’m going to start looking at different properties. Ones that have been sold. Ones that are active. Square feet. I want certain square feet. That’s going to be really important if you’re going to be looking for a specific property. 2,000 square feet is a little bigger than I would like. 2,800 is bigger than I would like. Now here’s the caveat. I have in here, I have a property that is bordering a freeway. That, for me, is something that you have to be very aware of. I’m actually looking. Once I do that, I then will actually go over to … I’m looking at this property, and here is the freeway. That is very concerning to me. I don’t want to necessarily cross that freeway if I don’t have to. I will zoom out a little bit, and I will take a look at other properties here as I was just showing you guys.
You can do a couple different things here. You can actually do more, or you can even go up here more. You want to see homes that were sold in the last six months. I want to apply that. I want to apply listings. I want to say for sale. I also want recently sold if that is unchecked. I want to check that here. This is unchecked. I want to check it. Here are all the homes that have been recently sold in that area. I want to stay in this ball park, and I want to start looking for homes that potentially are around the same square footage. This would be a great comp. You can click on this one. You can see that looks pretty good. This obviously is remodeled. This was sold for 276,000 dollars on January 23, 2017. Now we’re starting to write these down. Maybe you put them in Excel spreadsheet.
Maybe you’re writing them down. This is how many square feet with this? This is 1,650. It was sold for 276,000 dollars. I’m going to go into my nifty little calculator here. I’m going to say 1,650 divided by 276,000 equals … Nope. Sorry. Wrong way. Zero, zero, zero divided by 1,650. That sold at 167,000 or 167 dollars a square foot is what that sold for. That’s something to take note of. That’s a fully rehabbed property as you can see, as you can scroll through these pictures. This is a fully rehabbed property. That is something that I’m going to take note. I’m going to close this one. What else would look good here? What is this? 1,620. This is … Red Doors a lot of times will say, “Yes. This is also a rehabbed property.” This sold in December of 16, so today is April 4th, so we’re still in a time fram that this is very much something that you could say is a valid comp. These are rehabbed obviously. This has also been rehabbed. You could start running the numbers on that, as well.
285,000. 167 was the first one. 285,000 divided by 1,620 equals 175 dollars a square foot. Now we’re even getting a little north there, which is great. What else do we have? 2,000 is a little high. 14 is a little low. What do we got here? What is this? 1,900. This is an as is. Now you know what as is. This is for rent. Let’s try to get something. You can take some of these. I like to try to get a little bit closer, so let’s jump over to Red Fin. What I like about Red Fin is … There’s a couple things I really like about Red Fin. Part of that is going to be … Again, here’s another map. You can go in here, and you can find properties that are roughly the same square footage that have sold. As you can see, these say sold right here. Sold March 6th. This is really recent. If you go in here, it was sold for 225,000 dollars. I might click on this. Actually, let me go back. I want to open up a new window. Let’s see here. Wait for it. I’m going to open this in a new window.
Damn it. Maybe I’m not. Just for time. This may not be fully rehabbed. Let’s look at some pictures. Not rehabbed at all. Not rehabbed at all. This was sold for 225,000 divided by the 1,680 square foot. This is going to be an as is comp. Divided by 1,680 equals … That sold for 133 dollars a square foot. That’s really good to know. We go back here, and again, we’re still working off this. Now again, if you look at this map, I’m trying not to cross this line. I don’t want to cross the freeway. I might go here and check out or see. Let’s go with C or E or any of the above. You can go here. Open a new link. Check this out. What does this look like? Nice inside. Looks like someone put some money into this. This is 1,700 square feet for a house. Doesn’t look like it’s a complete remodel, but they definitely put some very nice things in there. Yeah. There’s definitely a lot of improvement there, so again, if I’m going to go look at price per square foot, that was sold in January. I’m going to go back in there, and I’m going to say 277 is the sales price divided by 1,737 equals 159. 159 square foot. That was sold.
I would then say … Let’s go. Move this. Try tonight. I then would go back here, and once you’re here, or actually once you’re here, now I can go look at other comps of this property in a very similar area. Now I have all these comps down here. I can even further show you what I can further look at. These are all great. Great comps. You can just go in here. What is B? 1,700 square foot. That looks great. You go in here. Open a new window. You can continue to do this. Looks like a rehab. Look at the new flooring. Look at the cabinets. This is a rehab. Again, now you’re starting to learn how to at least run per square footage. Now, one of the things that I wanted to show you here is we want roughly to look at a property and to basically adjust it. When we sell it to the flipper that they can still make 10% on their money. We start backing everything out from that point, so as you saw that as is property. That as is property was 225. 225,000 dollars right here. This was the as is property.
Come on. This property is as is. This sold at 225. We actually, I think we got ours at … What did we contract ours at? We believe roughly there was … ARV is going to be around 290. I think we contracted ours at 205 is ultimately where we contracted ours. This is where we wanted our offer to be at. This is what we estimated our repairs. Again, on this property, same property, same square footage. I verified all that kind of good stuff. If I go into … I might be able to get to deal board from here. You can see here notes, highest sold price, 285, but we’re looking at comps. Average price per square foot is 167. We had 175. We had 159 and 167, so the average per square foot was 167. You take that. You multiply it times the 1,700 square feet that this is going to be. The ARV is going to be maxed out around 290 to 300. That’s where my end buyer is going to be selling the property is roughly 290 to 300. There’s a quick drop off down the mid 200’s as is and outdated. We applied slightly lighter numbers here. We figured there was a 35,000 dollar rehab, so they were going to shoot for 190 to 198.
We ended up at 205. We are buying it at 205, so with the purchase at 205, we just looked here that this was sold as is. This is a dated home. This needs a lot of work. Look at that bathroom. Holy hell. We contracted ours at 205. We’re still at 10% under market. You always want to shoot for five to 10% under as is market because then you’re going to leave room on the bone for yourself to make a good profit and then for your end buyer to make a good profit. As long as you leave room for your end buyer to make a good profit, you’re always going to win. Your buyers are going to keep coming back to you over and over again. We took the number … What’d we think? 290. We backed out at 35,000 dollar rehab. 290 grand backed out at 35,000 dollar rehab equals … Whoa. That’s not the right number. 290 minus 35 grand equals 255. Then we’ve got to figure that they’re going to have what we want to make out of it.
I’m trying to make 20,000 dollars on every single offer I make. 20,000 equals … We’re at 235. They’re going to have roughly 10% cost to sell. I’m going to subtract 23,000 dollars. You’re at 212. Now, I want to be under where we need to be. Now, that’s them buying it, their cost to sell, and me making my money. Now, I want to get a better deal. I’m making 20,000 dollars on this offer as is. They’re going to have some money in play, so we started at 190. Obviously Eddie came in and gave some more notes saying that we can buy up to 200, which would give them a 10% ROI. That if they bought it from us, they can make their 10%. Let’s start at 195, then we ended up at 205. We’re right in the ball park. We’re under as is value. 225 is as is value. If someone’s buying this property from us, and if I just go over to the deal board here … Don’t want that. Deal board. If I scroll over to the deal board … I’m sorry. We ended up buying at 192, and we’re selling it at 205.
We actually got the number we wanted, and our end buyer is buying it less than as is value currently is at the market. They have meat on the bone. If they’re going to be buying it at 205, and we want them to make 10% on their money, they need to be making at least 20,000 dollars to buy this deal. That 20,000 dollars is absolutely there if they’re buying it at 205. That’s how you run your comps. That’s how you’re able to do it quickly. I took about 24 minutes to run this primarily because I’m showing you and I’m toggling back and forth between our Podio account and Red Fin and Zillow, but you really want to be using Zillow for the comparable homes and then you can open them up here. Sold. You love … I’m sorry. Red Fin for that. Zillow for this. You can dig in a little bit deeper. You can go for for sale, recently sold, not recently sold. Then you can say days sold in the last six months. You can say 90 days, 30 days, and it gives you a little bit more flexibility. I suggest using these two websites, so that you can figure out where your offer needs to be. Where your offer needs to be.
Again, the reason why I really liked showing you this property is that freeway right there. That freeway is something that you don’t want to cross when you’re running. You don’t want to jump over in a A, B and F. You want to stay over here. you want to stay where your property is. With all that said guys, any questions at all? Richard: When comparing square foot price, do you stay within a couple hundred square foot? Excuse me. Yes. I stay within 10% one way or another. Even better would be 5%, so when comparing square foot price, if 10% either way I’m okay with. That’s what I’m okay with. If it’s 1,700 square feet, I try to keep it around 1,850, 1,900 square feet on the high end. I try to keep it 1,6500, 1,500 on the very low end is where I want to keep. You’re very welcome, Richard. Any other questions?
This is important. This should be done within ten minutes. It should take you no more than ten minutes to use Red Fin and to use Zillow to come up with your offer price. To come up with your offer price. You want to be under as is value. You want to make sure you’re leaving your end buyer 10% on the bone. You want to make sure you have your number. You want to make sure you’re backing out the rehab cost. You’re estimating the rehab cost. You got to do all that kind of stuff. Warren, what’s going on, dude? I have a buyer that’s asking for info on rents in the area. If you go rent-O-Meter is a good website. Rent-O-Meter. I think they actually even do it here on Zillow. Where’s Zillow? You could do this. Nope. You could do this and say for rent. Then all of a sudden you will get ones that are including your rent. You can do for sale, for rent. It makes it very easy on Zillow. Rent-O-Meter is also another good one. I think they have the same thing here. Similar homes will get you there. Then you can go into similar homes, nearby homes for sale, nearby sold homes, nearby properties.
This is all within Zillow. I thought Zillow had a rent thing. I’m sorry. This is all within Red Fin. I thought Zillow had one similar to Zillow. Rent-O-Meter is a good one. Nearby schools, similar homes, neighborhoods. You can play around with this kind of stuff. I know Zillow has that. I thought Red Fin did, too, but it doesn’t look like they do. There’s your answer. I wanted a 20K profit. I got 13 just based out of what the market was allowing us to do, but that’s how we … We always run our numbers wanting 20K. The first quarter of this year, we averaged just over 20,000 dollars per deal. That’s always … That’s like my baseline. I don’t want to … I’ll go under if I need to, but that’s the baseline of what I want to be getting. Do I share my data? Yes. Richard, yes. You always want to show them what you found. You always want to validate your offer with something. You want to validate it with here are the low comps. Here’s what’s selling in the market. How much money do you have to put in your home? Are you going to do the rehab? No. I will. I’ll buy it cash. I’ll close quick.
Now you’re showing them reality of what it is for them to sell their home on the market or for them to hold their home or rehab their home. You say 10% example ARV. Say that … Mark, I’m not sure I’m understanding. Okay. You say 10% example. ARV is 100,000 dollars times 70% minus repair costs. We don’t always stick to 70% minus repair costs. For Phoenix specifically it’s going to be closer to 80, 85% minus repair costs if we’re really looking at it because the market is so hot right now. Yes. I mean, at the end of the day, you can play those numbers. You just got to test it.
What do you mean by AIV instead of ARV, Mark? Do you add in closing costs when you’re estimating your costs? Well, I estimate mine. I’ll pay my front end closing costs, but then when I sell, the buyer’s got to pay their end. Yes. It’s not an exact science, but in the ball park that we play it’s roughly half a percent to 1% depending. We do a lot of deals, so our title agency gives us a break. You could probably average it .75 for our break, but a lot of times it’s 1% in a lot of other markets.
What do you say to a seller when they’re searching for highest and best offer? Well, I mean, that’s up to negotiating. That’s up to you being able to prove to them that this is the highest and best offer or whatever yours is. Ask them more questions. Say, “Why wouldn’t you list it on the MLS if you want the highest and best offer? Why not list it on the MLS?” Push them away. It’s incredible what happens when you push people away. The fear of loss of pushing them away will bring them back to you, and they’ll start answering honestly. “Well, I know I’m going to have to repair my home if I list it on MLS,” or, “I don’t want to pay commissions.” Well, that’s the highest and best you’re going to get, but at the end of the day, you’re going to net a lower number than you think. Here’s what my highest invest. What are you looking for? Are we in a ball park? That’s how you would handle that, Nelson.
If you could put comps into one equation or formula … I mean, you want to average the comp sales. You just average as is comp sales. I want to be 10% less than that. If you have a lot of properties that you can find that are sold as is. If you can have three or four, average them out, and I want to be 10% less than that would be a formula for comps. If you just want to use a MAYO formula, maximal liable offer. For me, it’s 80 to 85% of ARV minus repairs would be then minus the fee I want to make. That’s right about where I’d want to be. Let’s just … Oh, that’s not what I wanted to open. I want to open this. Let’s just use, for example, we’re selling this at 291 times 85% equals 249 minus 35,000. Now we’re down to 212 minus my 20 grand. We’re at 192.
If you guys remember here in Podio, 192 is going to be our offer. Buy price, 192. See? Right there. That’s exactly what it was. 85% of ARV. This is literally what we bought it at is 192. We sold it at 205, so we’re leaving enough room on the bone for our buyer. We’re running at about 85% of ARV minus repairs minus my 20,000 dollars. We’re at 192. Now, I didn’t make that. I probably could’ve made a little bit more money, but I wanted to get the home sold. We’re okay with it. Nelson, you’re very welcome. Mark, you’re very welcome. All right, guys. It was … You’re very welcome, Cheryl. It was a blast. Brad, you’re very welcome. This will be recorded, and we will see you next Wednesday. Peace.
