Lesson 6: How to Determine Property Value

Accurately calculating after-repaired-value (ARV) is crucial to being a successful cash buyer.  I learned this skill as a former CA licensed appraiser 25 years ago.   When I became an investor, the ability to evaluate market data gave me the confidence to expand my business geographically throughout Southern California.  Once you know how to do it, the process can be applied to any property location.  There are numerous online services that provide automated property values, but I don’t think they are reliable.  When analyzing houses, the sales comparison approach applies. Among the factors I consider are living area, age, lot size, location, and condition.  I  set up my comparable search to sort by distance from the subject property and I try to restrict comps to no more than 6 months old.   It’s paramount that the comps are selected from the same neighborhood as the subject property. If at all possible, try not to cross major streets, freeways, or city boundaries.  If there is a lack of comps I rather stay in the same neighborhood and go back 12 months than expand outside of the immediate neighborhood.  I like to do a second valuation on Multiple Listing Service.  I find that public assessors’ records often don’t tell the full picture.  For example, I might see a particularly high comparable, only to find on the MLS that the subject property was rebuilt as a new house, duplex, or has a new ADU.

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