A key first step in real estate investing is determining the Market Value or ARV – After Repair Value of a property.
Criteria used by many real estate investors and professionals includes the following:
Properties that –
- Were sold less than 1 mile away
- Were sold less than 6-8 months ago
- Have square footage that is 20% more or less than the square footage of the property you are looking at. For example:
- If you’re looking at a property with 1,400 sf then your range is 1,200-1,600 sf.
You should be looking for 3-5 comparable properties that are as close as possible to the number of beds, baths and square footage you want. Also try to find the same style of construction, as it is difficult to justify comparing a single-story ranch style home to a multi-level property.
Look at both online sources and sources from real estate professionals. With that in mind, here is a 3-step process:
- Local real estate brokers and agents have a great source of market knowledge, especially for obtaining both the average price that properties are selling for and the average price per square foot that the same properties are selling for.
- “Paid Sites” has their advantage in that the software they have available pulls from both County Records as well as the Multiple Listing Service (MLS). Do your homework and look for online customer reviews and compare them with other websites with the same claims. Here is a short list of some of those sites.
- You can also check with the MLS in your area and ask about the fee for their temporary/limited access for investors. This is a great tool to use for searching and evaluating properties and determining market value.
- Lastly, make use of several free websites that are well vetted and used my many investors and real estate professionals across the country. Here is a list of some:
There are many others but these are quite adequate for getting started.