How to Determine the Value of a House in Philadelphia
For part 3 in our series, “How to Buy, Flip, or Rehab & Rent Properties in Philadelphia,” we are going to look at how to determine the value of a house in Philadelphia. It is essential to know the value of a house whether you are buying, selling, or flipping a property. In a city like Philadelphia, property values can vary drastically even between houses on the same street. Check out the video below for our guide on determining the value of a property in Philadelphia.
What is the 70% Rule in Real Estate?
As mentioned in the video, one way to determine how much to offer is to use the 70% rule. This rule says you should aim to pay no more than 70% of the property’s After Resale Value (ARV). The 70% rule allows room for profit after factoring in repairs and other costs. As you become more experienced, you may come up with your own formula. However, the 70% rule is a great rule of thumb that should at least give you a ballpark offer number.
The 70% rule also relies on determining an accurate ARV. Finding solid comps can make or break your profit, so put some extra time into this step. Keep in mind that even properties nearby can fall under a different neighborhood. When dealing with properties in a city like Philadelphia, it really helps to know the city well or at least consult with someone who does. As we mentioned, even a few blocks can make the difference between an up and coming area and a less desirable area.
When determining an ARV, we like to look at 3 comps. Remember to always use properties that have actually sold. Looking at “active” listings doesn’t give an accurate representation of the value since you need to know how much people are actually paying for a property – not just an asking price. Once you have your 3 comps, calculate the average $/sq.ft. in order to determine an ARV. Remember to take into account yard size, interior upgrades, and other items that could impact the value of the property.
As you gain more experience with buying and selling properties, you will get better at determining the value of a property. Repair costs, holding costs, and other expenses can vary greatly and quickly becoming overwhelming. We are always willing to help! Are you are looking to buy or sell property in Philadelphia or New Jersey? Call us today at 215-770-3122 or send us a message online.