It’s part art, and part science.
Determining the market value of your fix and flip project is THE most important step of the fixing and flipping process.
Because you make your money when you buy, not when you sell.
You can’t decide on an offer price until AFTER you know how much the property will sell for after your repairs are completed (we call this the after repair value, or ARV).
The Art Part
Consumers (homebuyers) usually buy based on emotion, not logic. No matter how much research you do there are almost always circumstances that will help, or hurt the value of your fix and flip property.
For example, we once sold a house in a neighborhood for $135,000, even though there were no other comparable properties like it that had closed for more than $120,000.
How did we pull this off?
It turns out that the homebuyer’s parents lived next door. They had a small child and needed a babysitter. These buyers were willing to pay a $15,000 premium to get our house.
The Science Part
There are three metrics I consider when determining market value of a property:
Active listings in the area
To learn more about how I use these check out the video below, beginning at 20:45:
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To accurately assess a property’s after repair value you need to compare it with other properties that have similar features, in similar subdivisions. And by figuring out how many other active listings (houses for sale like yours) there are in the area, you can get a good idea of your competition.
Combining Art and Science
When you have a good feel for the neighborhood your property is in, and have a solid grasp of the data to support your estimated market value, great things usually happen.