Understanding Comparable Sales in Your Area
You have a lot of things to understand before becoming a new investor. Learning the terms should be one of the first things. Between term learning, numbers, education, and estimates, it takes some time to soak it all in. Once you’re armed with enough info and feel ready to invest, your next important move, is to know just how far your dollar can go in that particular market. You can do all of it perfectly right, but if you end up being significantly off in your resale estimate, you might be left with very little to zero profits. Before making your first offer, you want to understand all about the market in your area. Understanding comparable sales in your area can be a good advantage.
The best investors are able to size up a property when looking at it. They are quick to evaluate what the costs of any work will be, and what the resale price should be. Naturally, this skill can take months or even years to perfect. However, it is a necessary tool for an investor. If you have no idea what a property may sell for, then you also can’t evaluate how much work will have to go into it. It takes time, persistence, and practice to gain these skills. You have to look at what has already sold and what’s available on the market. That will be your catalyst to reaching your price point.
Take a peek at each and every property that has sold in that area in the last 90 days. Realtors can usually provide you with that information from listing sheets and MLS. The sheet gives you information about the age, condition, style, and size of a property. Watch for any type of amenities that are included, along with any deficiencies. You’ll be able to see if a property was in a foreclosure, or went in a short sale. You will also find information in regard to whether or not the seller was in probate, and whether or not the property was sold ‘as-is’. Each little piece of information carries clues, like revealing where the market happened to be at the time, and where it seemed to be going. Being equipped with all this information helps you to better gauge future price points. It will give you some idea about what needs to be improved on the property you are interested in.
Once you know what properties have sold, it’s time to have a look at what properties are currently on the market. These properties are going to be your competition as long as your property is up for sale. If there happens to be a similar size home existing on your street, and it is on the market, then you probably won’t get much attention if you go any higher than 10 on your price, unless your home is of higher superior quality. You need to put yourself in the buyer’s shoes, and try to think what they are going to see and think. A lot of investors mistakenly over-inflate the sales price based on their research. Buyers really don’t care about what it cost you to rehab the house, or what it was like for you. They only care about how it is right now as a finished product, and the way it stacks up against your competition in that area.
If you can get a grip on understanding comparable sales in your area, then you’re ahead of the game. You need to take time to find out just what has been sold, why it was sold, and for how much. This will give you an advantage when you go to make your next offer.