Chapter 02

Determining Property Value

Now, as hard as you may try, you’re bound to find similar properties that don’t match your bed/bath count, square footage or year built or renovated perfectly. Because of that, find at least 3 similar properties and assign them different weights to give you a better estimate of how much you can charge per square footage.

(You can use the table below to give you an average of what you can charge per square foot to make sure you’re getting your money’s worth).

Here’s an example of how to fill out the table.

Let’s say you found a property at 123 North S. St. in Phoenix. It’s a 3 bed 2 bath 1,900 sq. ft. built in 2011 and sold 30 days ago for $215,000.

Then you find the following addresses you’re hoping to use as comps:

House A on Fox St.) 3/2 in the same neighborhood sold within the past 3 months with 1,800 sq. ft. for 450,000.
House B on Second St.) 2/2 in a different neighborhood across a major intersection closest to a school that was renovated and sold in 2022 for 425,000 with 1,700 sq. ft.
House C Cliff St.) A 2/2 in the same neighborhood with 1,100 sq. ft. and sold 30 days ago for 50,000.

Two investors comparing property notes in front of line-art houses with a map pin

WorkbookRun your own comps →Open the workbook’s weighted comping table and plug in your own property — the $/SF, weights and fair market price compute live.

Tasks:

0 of 5 done

Identify Similar Properties for ComparisonEven if they’re not identical in features (like bed/bath count or square footage), identify at least three properties similar to the one you’re interested in. They will serve as comparatives to determine the price per square foot you should aim for.
Fill in the Comparative Analysis TableStart by filling in the details of the properties you’re comparing in the blue cells (Address, Date Sold, Sq. Ft., Sales Price, and $/SF).
Weight Your Comparisons Based on SimilarityAssign weights to each comparable property based on its similarity to the target property. For instance, properties that are more alike should have a higher weight (like House A in the example).
Calculate the Weighted Price per Square FootMultiply the weight by the price per sq. ft. for each property. Add up these weighted values to determine a fair market price per square foot for the target property.
Reassess Your Exit Strategy with Every PropertyAfter you’ve analyzed comparable properties and have a better understanding of the market price, revisit and determine your exit strategy for the investment. Don’t rely on a one-size-fits-all approach; each property may require a different approach based on its price and market conditions.

Remember, while data is a powerful tool in real estate, it’s also essential to combine it with a strategic approach for every investment opportunity. More of these tables are available in the “Underwriting Guide and Workbook” in Chapter 6.

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