When Comps Go Wrong
8 times out of 10, jumping on the internet and looking for comps comparable to the property you are interested in acquiring will get you very close to the numbers you need to make an informed, educated decision. The problem is those 2 out of 10. If you are just starting out, a miscalculated comp can send your dreams of becoming a Real Estate mogul down the drain.
If you saw my FB live post from Thursday, Nov 10th, you got a chance to see first-hand exactly what I mean. I was standing on a street near New Jersey’s board walk and showed a 300k house nestled in the middle of rebuilt and remodeled homes, many rebuilt after hurricane Sandy. With the exception of just a handful of original, modest homes, the neighborhood was full of 700k to million dollar properties.
If that wasn’t enough to throw you off, the street I was standing on was extremely wide which is one of the very few wide streets in the area. The adjacent neighborhood just around the block had alley sized streets, which isn’t the most desirable for the majority of potential buyers. The combination of these irregularities is enough to throw your comps into disarray. That is why I always stress having not only boots on the ground in the area you plan to invest in but make sure the person(s) filling those boots have an extensive knowledge of the areas and all of its dynamics so you can feel 100% certain that the comps they are sending back are truly apples to apples.
I am from New Jersey and familiar with the area in which I was standing. If I were not from the area, and was pulling comps from my computer in Southern California, the comps in the area would lead me to believe that the property I was looking at was worth twice as much as it is in reality. I always recommend visiting the area you plan to invest in at least twice and don’t move forward until you have at least 2 relators/brokers who possess an in-depth understanding of the area. Only then would I move forward on investing away from your own backyard.
Robert Orfino, 2017 #AskARealEstateInvestor
Alpine Premier Investments