Avoid paying too much for your rehab by knowing what its worth when you sell!!

BIG MISTAKE number 2.  Not getting the ARV (after repaired value) correct.

You’ve got this great house! It’s fully rehabbed and you’re in it for $100,000.00 You think its worth 135,000, this is a pretty good looking deal!  But, its only worth 115,000… wah wah.   Your good deal just turned out to be a nice hobby that you made 5 grand from after you pay 6% in realtor fees and 3% for the buyers down payment (and you will in this price range).   How to avoid this.

Realtors have a lot of resources that help them determine this information.  If you are in an area where homes are all built within 10 years of each other and have homes that are similar in square footage (within 200 sq ft) it should be easy to compare, or comp (industry slang, we’re cool like that!)  You look back over the previous 9 months, not 15, not 24, 9.  9 is how far back appraisers will go to determine value as well.  That’s why we use that number.

If you see 15 houses that have sold that are similar to yours it should be a pretty easy comp, congrats!!  You can move forward with the deal fairly certain that you will create a superior product and be able to sell it in that market.

East Nashville is the best area in Nashville, in my opinion, to mess an investor over!!  Comps can literally change by $50,000 from one street to another!!  Put the same exact house on street “A” and its worth $200,000.00 put it on street “B” and it might be worth $150,000.00 and it takes twice as long to sell!!  This is where a good realtor that is very familiar with the area comes in handy.  They can point you to the good deals and help you avoid the bad ones.

A little common sense goes a long way! Drive the area.  If your street feels much much worse than the street behind it, IT IS!! It wont comp the same in the mind of a buyer just like it didn’t in yours.

I recommend that you leave these areas to do later on.  Find the places that are easy to comp.  This business is hard enough with ALL the info… why guess?

Next Ill cover an area that is near and dear to my heart, Renovation budget!! Asking the house what it needs done to it, and actually listening!! See you next time!!