My question is prompted by the fact that I have learned of an excellent (possibly) deal on a piece of real estate, in another state.
I would like to buy the property, as an investment.
At any rate, can you check numbers like cost/square foot, or something similar, to see if the property is undervalued?
I know valuing real estate is a very inexact science-so I’m hoping that there is some simple algorithm that will (at least) tell me that I’m getting a reasonable deal.
For you folks in RE, does this question make sense?
You look at comparable sales. What, exactly, is comparable is where some of the discretion comes in and is the reason for professional appraisals.
There’s nothing reliable that will give you a simple mathematical relationship because so much of the price depends on other factors - condition of the property, whether there’s a view, etc.
As far as the best math alone can offer: Zillow.com and Eppraisal.com both provide estimates on the web for most properties, but you have to take the information with a grain of salt. Some listings have incorrect number of rooms or square footage. They may not be aware of improvements or damage. Even when the listed information is correct, an estimated value of $250k on a house might be +/-50k when you look at the low/high offered by these sites. Knowing that a property is worth between 200k and 300k is not useful enough for an investment decision, but it might let you decide that more research is worthwhile.
You can go to your state’s MLS site and check out recently sold properties (comparable sales) and properties currently on the market (competitive properties), but so many factors enter into a property’s value: Location, number of rooms, square footage, etc.
What is the cost of the property. What are rent ratess in the arrea. What is the condition of the property and what repairs will have to be made. You have to kicck the dirt
Trulia.com will show you prices for similar recently sold properties.
Dracoi is correct. I believe that the sites like Zillow will only get better as better data is entered into the system.
I think that those systems are only useful for single-family residential housing. You didn’t say what type of property this is, but if it is commercial property or vacant land that is a whole nother ballgame.
Appraisal techniques for different types of commercial property can vary quite a bit. Tell us a little bit more about the property so we can give better answers.
If the property is single-family residential and you are looking to flip it or operate as a rental, then that analysis is pretty straight forward. Add estimates for repairs/renovation to the purchase price with carrying costs (taxes, utilities, insurance, mortgage interest) and compare that to an estimated selling price (if flipping) or what you expect to charge in rent.