Posted by David Krulac on February 22, 2002 at 15:05:08:
staying in the mid range is good, just don’t expect to get a price higher than the market when you go to sell.
Good Luck
David Krulac
J.P. - Comparable sales question!! - Posted by Tim (CT)
Posted by Tim (CT) on February 22, 2002 at 06:54:21:
I have a property that I’m going to take a look at this afternoon. Based on everything I’m being told (and, I’m verifying numbers for myself), it looks like it might be a pretty good deal. The house started off as a typical raised ranch but it had a bunch of changes done to it including changing the two car garage into an in-law suite and a 3 car garage put on. At this point, the house is approx. 3500 or 3600 sq. ft… Now, in my area (CT.), most raised ranches are between 1700 and 2200 sq. ft. on average. How do I pull comps for this one? Can I compare this house to a colonial that would have a large sq. ft. value as well as the in-law suite and 3-car garage? I want to make sure I compare apples-to-apples but I feel this apple is just so far above the other apples that I may have to compare it to another fruit!!
Any thoughts would be appreciated.
Thanks.
Comparable sales question!! - Posted by David Krulac
Posted by David Krulac on February 22, 2002 at 08:26:45:
Tim,
I’d second Ken’s comments and add that imho you never want to be the highest priced, biggest, or best house in the neighborhood. If the average house is $250,000 and the highest price house is $$285,000, you don’t want to be at $350,000. Using this example, I would want to be under the top selling house of $280,000 and would like to be under $250,000 EVEN for a house whose size would indicate a value of $350,000.
Was the addition/conversion which is the cheapest remodling as you are not building new space only converting, was this done with a building permit? If not depending on enforcement ib your area you would have to tear down/rip out the unpermitted space, not be able to get bank/institutional financing and be subject to fines and penalties. Check with your local municipality.
David Krulac
be careful - Posted by ken in sc
Posted by ken in sc on February 22, 2002 at 07:11:26:
In my experience, garage conversions, in-law suites, and houses with 1000 sqft more than the average are hard to value and less valuable than many people think. Definently less than the typical price per foot for the area. Be careful about getting out of the range of your neighborhood.
Ken
Re: Comparable sales question!! - Posted by Tim (CT)
Posted by Tim (CT) on February 22, 2002 at 08:37:00:
Good point. I don’t know. I’ll have to check with the town records to see whether a permit was pulled for it or not. I believe the work was done almost 2 years ago.
I certainly agree with your theory about not being the highest valued home in the neighborhood but since the dollar value I’m paying for it is in the middle of the road, why would I care? If the median price for the neighborhood is 170 to 175k and I’m paying 172,500 for it, wouldn’t that suffice even though the characteristics of the home suggest a much higher price such as $240k or so?
Thanks again for your input.
Re: be careful - Posted by Tim (CT)
Posted by Tim (CT) on February 22, 2002 at 07:24:20:
Thanks for the reply. Based on the numbers that I’m hearing, as long as they’re accurate (I’m going to find out today), I don’t think there’s any question this house out of the range of the neighborhood. There aren’t too many 3500 sq. ft. ranches around. But, even if I can’t compare it to a colonial with the same values, I should be at the top of that neighborhood. Right? That could push me into the $200,000 mark.
If this house was a colonial design in a colonial neighborhood, it would bring in somewhere in the mid to upper 200k range (maybe $265,000). I’m looking at getting it at $172k. So even if I can only sell it for $200k because of the comparables I think that’s O.K. Now before anybody jumps all over this and says the profit margin is too skinny, let me say that I know that. The reason I’m interested in this house is that there’s already a tenant in there that’s paying $2,400/mo for this place (it’s the state and they’re using as a group home) and there’s every reason to believe they’ll be there for at least the next 2 or 3 years if not more. With the $2,400/mo, that gives me about $700 positive cash flow. I think that’s pretty good. This tenant pays for everything (i.e. snow removal, mowing lawn, city water, etc.). All I would do is collect the rent, pay the mortgage and pay the taxes. It’s very little work for a good monthly positive cash flow. So, even if I can’t make too much on the back-end, the monthly positive cash flow should work well for me. At least that’s my thought. Please, if you see any holes in that, let me know.
Thanks again.