When working in the property investment arena, being able to select good reliable real estate comps is essential for any real estate investor. It can be the nuts and bolts of your purchase offer and if you don’t understand what makes a good comp, then you could wind up over paying for a rehab property that is not worth nearly what you thought it was. Your InvestorCompsOnline account can equip you with up to date comp information for your property deals. I want to run through some of what I feel are the more important aspects of choosing good comps and the points of planning a good property rehab.
So what is a comp? Comp is short for comparable sale. These are sales of similar homes in the same neighborhood as the property that you are looking at buying. They should have as much in common with the subject property as possible in order to give you a solid estimation of the subject property’s market value.
Selecting a good comp is all about comparing like with like. When looking through local comps, there are several items that you will want to compare. Here is a list of the most common.
- Distance From Subject Property – in most major cities, you want to pull comps located within a ½ mile radius of the subject property. If you are in an area with little market activity or a rural area, then pulling comps from a 1 mile radius is accepted.
- Date of Sale of Comp.- In most major cities, you want to pull comp sales that have taken place within the last 6 months. If you are in a slow market area, than going out to 12 months is acceptable.
- Construction – if the subject is an all brick house, then pull comps that are all brick houses; if it is a wood or vinyl siding house then pull comps that are wood or vinyl siding.
Stay plugged in guys, because in tomorrow’s post we discuss more items that you should look for when comparing and researching properties…