Lesson: What is Comping - An Introduction to Using Comparable Sales in Real Estate Investing

Definition: Comping

"Comping" is the process of finding similar recently-sold properties (comparable sales or "comps") to determine what your subject property is worth after repairs.

Why Comping is THE Most Important Skill

Bad comps = bad offers. If you get the ARV wrong:

Too High ARV:

• You overpay for the property
• Buyers won't buy your contract
• Deal falls apart, you lose credibility

Too Low ARV:

• You offer too little, lose deals
• Sellers go to competitors
• Leave money on the table

The Basic Concept

Find Similar Sold Properties → Calculate Average $/sqft → Apply to Your Property

In simple terms: If three similar houses on the same street sold for $150/sqft renovated, your property will likely be worth around $150/sqft when renovated.

What Makes a "Good" Comp?

Location

Same neighborhood, ideally within 0.5 miles. Same school district. Similar street type (busy vs quiet).

Recency

Sold within last 90 days is ideal. 6 months max. Older data may not reflect current market.

Size

Within 20% of subject sqft. A 1,200 sqft house isn't comparable to a 2,400 sqft house.

Configuration

Similar bed/bath count. 3/2 vs 3/2, not 3/2 vs 5/3. Same number of stories preferred.

Condition

Renovated comps for ARV, as-is comps for as-is value. Don't mix conditions.

Style

Similar construction type. Ranch vs ranch, not ranch vs 2-story. Similar age range.

Real Example

Subject Property: 3/2, 1,500 sqft, built 1985, needs full rehab

Comp 1: 3/2, 1,450 sqft, sold 30 days ago, renovated $225,000 ($155/sqft)

Comp 2: 3/2, 1,550 sqft, sold 45 days ago, renovated $240,000 ($155/sqft)

Comp 3: 3/2, 1,480 sqft, sold 60 days ago, renovated $230,000 ($155/sqft)

Conclusion: Market is at ~$155/sqft for renovated. Your 1,500 sqft subject = $232,500 ARV

Common Comping Mistakes

✗ Using active listings - These are asking prices, not sold prices. Worthless for comping.
✗ Ignoring condition - A flipped house sells for more than a dated one. Know what you're comparing.
✗ Too few comps - One comp is not enough. Get 3-5 minimum to see a pattern.
✗ Crossing neighborhoods - The street on the other side of the highway might be a different market.
✗ Cherry-picking high comps - Use all comps, not just the ones that make your deal look good.

Key Takeaway

Comping is the foundation of every offer you make. A good comp is recent, nearby, similar in size, and in similar condition. Master this skill and you'll make confident offers that actually close.

What is Comping?