Determining Value

I am having a hard time figuring out what is a deal and what is not. I am having a very hard time determining the true value of property. The comps seem to be all over the place. When I talk to real estate agents they

For example, I am looking at a town home to purchase at 911 Osceola St, Denver CO. It is a 4 bed 2 bath 1400 sqft town home built in 2006. I am trying to do a short sale, but I can’t really determine the value of the property. The values seem to range between $115-200k. I feel like it is worth about $120k.

How should I go about valuating this property? Even if you know all the tricks in the book, if you can’t properly valuate a property, you can’t determine if it is a deal.

Please tell what type of value you are trying to determine. The ARV, the value to a landlord, the value if it was going to be flipped, etc.

Well, I am looking at buying it as a rental property. It is only 3 years old so the only thing it could use is interior paint and carpet, so I would expect the ARV to be pretty close to current value. It currently has section 8 tenants renting it at $1200/month. The reason I like it so much is because it would cash flow great. There just are some properties in the area that have sold for much less. I just wonder if my asking price is too high.

Well, I am looking at buying it as a rental property.

I just wonder if my asking price is too high.

So are you buying it or sellling it? Your asking price? Do you mean your offer?

If I was selling it I would try to sell it using the 1% rule (which no one is using in this market) Personal opinion is only a sucker would pay that much.
Rent should equal 1% of the total purchase price. So, $1,200 X 100 = $120,000 minus repairs.

Some people here are using a modified 2% rule. So $1,200 X 50 = $60,000

I buy at Rent X 30-35 minus repairs in low income areas. So $1,200 X 35 = $42,000 minus repairs.

There are many here that wont touch a property that makes less than $100 per door.

Gross Income: $1,200/mth = $14,400 annual
Expenses (50% rule of thumb) -7,200
NOI: $7,200
63k@5%/15yrs: -$5,978
Yearly Cash Flow $1,222
Cash flow of $101 per month at $63,000 purchase price and the above terms.

Well if you are doing a short sale on the property and it is valued at $120k chances are there is a first and a second Mortgage on the property 80% first and a 20% second. So the chances of the 2nd paying off the first after sale at auction are less then 5% So on there $24k second they should take 1k, bringing the property down to $97k. You can then hammer the first by at least 10% bringing the property down to $87,300 then you have the lender (seller) pay up to 3% of the closing costs. So at 87k you would make some awesome cash flow. So yea this could be a deal. Not to mention the area is great Close to 6th ave and easy access to downtown.

There are a few things you need to consider to come at a decent ARV. You can get an appraisal for the best accuracy or opt for BPO from the realtor. Now if you want to tackle the task on your own here is what you need to do to come up with a decent ARV. Proximity, size, bedroom/bath count, style, and most recent sales. Obtain comparables (sales) most similar to the Subject as possible. If the Subject is a colonial, 2000 sq. ft., 3 bed/2.5 bath. You want to compare it to the most recent sales similar to the Subject as possible to get an estimate on what you can get for the property. The 1% rule is a great rule of thumb for rental property. I actually used it when I began investing.

The 1% rule is a great rule of thumb for rental property.

The 1% rule is a completely idiotic way to buy property that won’t even cash flow. Only good for selling to fools. Not good for buying. 2% maximum for buying.