If you’ve been keeping up with our blog posts and our show, you already know that Christina and I are big fans of checking out the comps. We always advise you to check out the comps when you’re flipping a house, but what do we really mean by that? What should you be looking for when you look at comparable listings and/or when you visit the properties? How can checking them out help you determine the ARV for your flip house, and how exactly do you determine what you’re going to do with your rehabs based on what you’ve seen with the nearby comps? Well, if you know what to look for, you can learn a lot and make a lot of valuable decisions to make more money on your investment properties.
Before You Buy – Size and Location
First of all, just looking at the MLS, you can find out what houses are selling for in your area. If you know the square footage of your flip house, you can look for houses that are the same size as yours. Once you’ve located a few similarly sized houses, take a look at their locations. Are they nearer or farther from schools, attractive shopping districts, parks, or noisy highways?
With this information, you’ll get a good idea of the home values in the neighborhood where you’re flipping. That will tell you how much you should spend on your rehab to bring your house up to market value. At the same time, it gives you a good idea of what you should spend on the house, and you can come up with a good offer price for the seller.
And you can actually do all of this without visiting any of the comps in your area. Just visit the property you’re interested in to make sure that it isn’t a total flop and check out your comps on the MLS.
When You’re Ready to Rehab – The Floor Plan
After you buy your flip house, I definitely recommend visiting a couple of comps before you settle on a rehab plan with your project manager or contractor. When you visit, you’re going to want to look for a few different things, especially if you’re looking at another investor’s flip, and the first thing you want to look at is the floor plan.
Home buyers today want to see open, airy floor plans. They want a lot of natural light and a lot of free-form space, especially in the living room, dining room, and any other family areas. If the comps in your area have updated floor plans, you absolutely have to do the same to keep up. If they don’t, you might be able to get away with a little bit less, but you should still consider the added value to your ARV.
Upgrades and Updates
Next, look at the upgrades they’ve made. If they haven’t done much in the way of updates and improvements, then you may be able to get a higher price for your flip house than the comps, but be careful. You don’t want to over-rehab a house and then have it sit on the market because you’ve spent too much on it and it won’t sell.
Actual Sale Prices
Finally, don’t just look at the asking prices for comps in the neighborhood with your flip house. Look at actual sale prices and how long it took them to sell. You might see a comp at a really high asking price, but if it’s been sitting on the market for a month, that’s probably not a good reflection of market values in the area. If you want to flip a house in this area at your asking price, you need to know what people are actually making when they sell houses like yours. And you need to know what they’ve done to their properties to get those prices. With that information, you’ll be ready to go.