Here at Move in Philly, we take data seriously. It is ingrained in who we are and how we operate at our core. In fact, we built our entire company and our MiP calculator around this concept.
So, when we started considering how to evaluate properties, we quickly realized that there was no good option for creating realistic and accurate assessments of properties that allowed for a fast decision making process.
Now, let me clarify, when I say fast, I mean FAST.
Speed is Everything
When we were analyzing properties, many of which you can read about on here, it was taking us a couple of hours to really understand all of the costs associated with each property. If you are reading this, then the odds are that you have experienced the same type of anger that we have when you perform all of the calculations on a property to establish its true value to you only to realize that the property is not worth your time.
I hate this feeling, as the only thing more valuable than my money is my time, and this felt like I was getting ripped off every time.
Add in the fact that I had to do detailed research every time I did a property evaluation for every type of home enhancement that I was looking to make, and it is easy to understand why I was losing my mind.
Therefore, my partners and I here at MiP decided to make a change. What we did was we created our own calculator that would provide us with the Maximum Available Offer for any property. We incorporated some of our own math, like our personal valuation of a property, the profit that we are looking to make and our assumed profit points for all parties involved in a deal, and we coupled this with researched and supported figures from trade professionals to provide the most accurate depiction of what the true value of an investment is.
However, just creating a new calculator is easy (just ask my partner Mike). We need to put this thing through the rigors of an actual case study.
So, let’s jump on in.
I will not only walk you through our calculator and show you the value that it can offer, but I will also time myself on the actual analysis, as I want to prove that this is the MOST EFFICIENT real estate investment calculator you will ever use.
Property Investment Analysis
The property that we will be looking into today is 4832 B St Philadelphia, Pennsylvania 19120, which was just listed as of March 14, 2018 at an asking price of $53,000.
As with all of our other properties, the most fun part of this evaluation happens first, in which we assign a grade level to this property. After looking into the property, it is pretty clear that, while not a gut job, this property has some massive room for improvement.
Therefore, I placed this property at a 2, since it doesn’t require a complete gut job, but it does need a good amount of work to be livable.
With that analysis, I am literally done the first step!
The next phase of our calculation is to evaluate some comparisons, which was as simple as going to Realtor.com and finding 5 properties within our same dimensions. I won’t bore you with the specifics, but HOLY CRAP WAS THIS EASY!
3 beds, 1 bath, roughly 1,100 square feet in Philadelphia. Yea…that was not a difficult comp at all.
It took me all of simply putting in the bed, bath, and square foot range filters on and I immediately had multiple comparisons. The difficult part, if you want to call it that, was to go and find the lowest selling price so that we would have a conservative average.
This took a little judgment time but really was not a difficult process as all I needed to do was be judicious with my selections, and I picked homes that were in relatively the same price range but also scraped the bottom of said price range.
For our example, this average amounted to a listing price of $98,382.
*Note: there will be variance here as some properties are a bit more remote than others, so there is a chance that this is a time drain. However, as long as you budget yourself a MAXIMUM of 20 minutes before you view the property, you will have plenty of time to handle all of your comparisons. However, it took me 9.5 minutes for this property, so I’m going to stick with my accurate numbers for this article.
How to Estimate Rehab Costs?
Now the truly difficult part, estimating the rehab costs of a property.
Luckily, you can hit us up for our calculator and just simply check off the boxes as you go, which makes this process even EASIER than my current process. This is simply because I am running a test, so I am not going to visit this property, but rather I will simply rely on the pictures that I am provided with to establish a baseline. If I am unsure of any enhancements to be made, I went conservative and assumed that we would need to incur that cost.
What I was presented with was an estimate that accounted for every enhancement needed, with estimates broken down to the square foot. If you could break out a tape measure during your walk-through, then you would have almost an exact price breakdown.
Since I couldn’t walk through the property myself, I had to eyeball most improvements that would be needed, but given the glut of photos that were available, this wasn’t too difficult of a process.
I just checked off each segment of the calculator as I crossed it, which entirely replaced my pen and paper as how I took notes on a property as well. I could base the eye test off of how many things I believed needed to be improved upon.
This presented me with the Maximum Available Offer that ended up being ~$21,000 below asking price, which means that I will be passing on this property.
The reason we ended up so far below was because the owner is asking for far too high of a price for how much work needs to be done on the house.