Here’s an excerpt from an e-book I wrote that explains how to view properties:
Inspecting The Property
DO NOT TRY TO BUY THE HOUSE OR MAKE ANY OFFERS ON IT WHILE YOU ARE
THERE! If they ask your opinion on it, simply say that you will need to check the
neighborhood values and consult your partner before any decisions can be made.
Don’t go by your self if the house is in an area you feel is unsafe.
Bring with you the Property Inspection Summary Report, as well as the comparable
sales information you pulled from realtor.com. Take the following steps for each
property you see:
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Drive by the owner’s house a little bit early so you can take good look at the
exterior, but don’t get out yet; drive the comparable sales first.
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Using the comparable sales data, drive to each house listed to see if the owners’
house (subject) is reasonably similar. Prescreen the list to eliminate any two-
bedroom homes if the subject house is a 3 or 4 bedroom house.
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While driving to each comparable house, quickly look to see if the house is the
same style of house as the subject. If the subject property is a brick house, the
comparable must be. If the subject has a garage, the comparable must at least have
a carport. If the subject is a two-story house, the comparable should be as well.
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Please take note of the condition of the comparable property. Record if it is in the
same condition as the subject property, or better (or worse).
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Go back to the property you are interested in and meet the owner or realtor. Give
the owner one of your business cards, thank them for agreeing to see you, and ask
for a tour.
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Ask the owner or realtor to show you all of the repairs that they see as being
needed, and ask them what they think it will cost to do them. Don’t comment on
what they say about costs, or say anything negative about the house. Estimate and
record what YOU see as the cost required to bring it up to either full retail or
landlord standards, not Slum Lord. Estimates repairs in terms of $5,000, $10,000,
$15,000, $20,000, etc. (see the estimating repairs section below for more info).
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Once you are done viewing the house, thank them for their time, and let them
know that one of our agents will be contacting them soon to make an offer. Let
them know that if they have any questions they can call you (or your answering
service), or visit your Automated Property Locator website for more information.
Estimating After Repaired Values (ARV)
By the way, this is an art, not a science. What you are attempting to do here is to make
a reasonable estimate of what the house will be worth after all of the repairs have
been made. This is the starting point for the entire deal, and it has to be as close to
100% accurate to possible! If this number is way off then there is no deal and you will
have no money coming your way!
There are several ways that you can do this, always use at least three of them. First
off, you can ask the seller or realtor what they think the house would be worth.
You would be surprised how many times they are right in that regards. Take caution
though with owners that are emotionally attached to their homes, sometimes they
can’t see the forest for the trees. If they have taken the time to get a recent
appraisal done you can ask to see that. You can also use the flyers from houses for
sale in the neighborhood to give you a ball-park figure. Again, make sure that the
houses are the same as the subject property.
Another source of property values are realtor websites such as realtor dot com or
zillow dot com. These sources are free, but unfortunately they wont give you a complete
picture of what you’re looking at, so take caution. Another free source of info is the
county’s tax appraisal on the assessor’s website. This data can be a bit skewed; so
don’t take it as true value without other sources to back it up.
Finally, you can always pay a licensed appraiser to do what called a desk review
for about $50. A desk review is simply that; from the comfort of his desk the
appraiser takes a look at the comparable sales data for the area and makes an
educated guess as to what the house should sell for in good condition. You can also
subscribe to sites like realquest.com, or ask a realtor to pull some comps for you.
Estimating Repairs
When you first get started estimating repairs seems like a daunting task. Especially
since you have no idea about what anything really costs or even what you are looking
at. But, with time and practice, it becomes a snap.
Except for the quality of the cosmetic trim, all houses are pretty much made of the
same stuff, brick, concrete, and wood. Once you get that through your head, you’ll
realize that figuring out repairs is just another math problem.
Most of the houses you’ll see will need simple repairs like paint, appliances, tile, and
carpet. On average, it costs about $1 to $1.50 per square foot to paint the interior of a
house, and $2 to $3 per square foot to paint the exterior. Once you know what the
square footage of the house you need to paint is, then it’s a simple math problem of
dollars per square foot times total square feet being painted. In other words if the
seller has a 1,000 square foot house, and all of the interior walls need to be painted,
and your painters rate is $1 per square foot, then $1 x 1,000 SQFT = $1,000. The
same math for carpet applies, dependent on the quality of the carpet to be installed,
and the square footage of the rooms being carpeted (exclude the kitchen and any
areas with tile or hardwood floors). Look to pay around 1.50 per square foot installed,
using builder’s grade carpet and pad.