Flipping, rehabbing, holding—whatever your real estate investing strategy—your profit is largely determined by the price you pay for the house. Getting the best comps means determining the best price for buying, financing and selling. Pull the wrong comps and your flip will flop. Bad comps put you in a poor position when applying for loans, but good comps help you secure funding from residential hard money lenders in PA.
Buying real estate in Philadelphia is quite different than buying in Miami, Detroit or even Pittsburgh. Yet all too often comps are pulled with the same assumptions in all of these locations. Take into account what makes Philadelphia unique and you’ll be able to pull more accurate comps, make better offers, set the best selling prices and put yourself in a better position to secure financing from residential hard money lenders in PA.
What are “comps”?
“Comps” are comparable house sales. What have nearby houses similar to the one being considered recently sold for? An ideal comp is a similar house sold in the last three months, within the same subdivision or within one mile. You’ll want at least three comps for accuracy, even if that means going further back in time or further out than a mile. You’re aiming to get an accurate estimation on what this house could sell for in good condition (if you’re rehabbing it) and/or what you should pay for this house in its current (distressed) condition.
Tips for getting the best comps in Philadelphia
Look for comps within a quarter-mile: Housing conditions vary widely in Philly, not just from one neighborhood to another, but in many cases, from block to block. Newer investors in Philadelphia should go the subject property and walk to their comps to see if they are truly comparable. In Strawberry Mansion, for example, it’s all about proximity to Fairmount Park, but in other areas it could be proximity to transit or highways, or whether you cross a major road like Broad St.
Keep within 20% of the finished square footage: Anything more than 20% over or under the square footage of your subject property will be a very different value. Watch out for listings with “seller assessed” square footage as sellers will often include areas not calculated by appraisers, like illegal additions or basements that are not at least seven feet high.
Search for similar construction and within 10 years of age: Comparing your century home to a new build will not help determine the right value. Compare brick to brick, frame to frame, row house to row house, two-storey to two-storey, etc. If you’re aiming to rehab an older house, try to find comps where a similar aged house has already been rehabbed.
Summary
Keep these tips in mind when pulling your comps for properties in Philadelphia to give yourself a confidence boost. You’ll be able to make better offers, earn more profit by setting the best selling prices and you’ll be better prepared to secure financing from residential hard money lenders in PA.