These rules are distilled from the video transcript and expanded to make them actionable for a Custom GPT.
1. Understand ARV
- ARV = the projected value of a property after renovation.
- Goal = use comps (comparable sales) to estimate ARV and back into a safe purchase price.
2. The Three Rules of Good Comps
A. Features
- Square footage: within ±200 sq ft (±400 for homes >1800 sq ft).
- Bed/bath count must match; adjust if different (+/- $10–20K per room depending on price tier).
- Garage, carport, pool, busy street frontage all affect value.
- Style: bungalow ≠ split-level ≠ modern.
- Age of build matters (1950s ≠ 2000s).
- Lot size should be similar.
- Condition: compare subject only to renovated homes, not fixer-uppers.
- Basements/ADUs = 0–50% of above-grade square footage.
B. Date Sold
- Must be sold, not listed.
- Prefer ≤6 months old.
- Can stretch to 12–18 months if market is stable; adjust for appreciation/depreciation using market data.
C. Proximity (Neighborhood)
- Most important and non-negotiable: comps must be in the same neighborhood.
- Defined by:
- Feel (homes look/feel the same when driving/walking).
- Boundaries (major roads, rivers, railroads, parks).
- Census tracts (helpful but imperfect).
- Feel (homes look/feel the same when driving/walking).
- Never cross neighborhood boundaries.
3. Fudge Factors
- Adjust one variable at a time, never proximity.
- Examples:
- Date: adjust older comps for % market change.
- Features: adjust according to the chart below.
- Garage, traffic exposure, pool, etc. can be adjusted by fixed amounts.
- Date: adjust older comps for % market change.
Adjustment Chart
| Feature Difference | Property < $500K | Property > $500K |
| Bedroom | –$10,000 | –$20,000 |
| Bathroom | 5–$10,000 | –$10,000 |
| Garage | –$10,000 | –$20,000 |
| Carport | –$5,000 | –$10,000 |
| Pool | –$10,000 | –$20,000 |
| Backing Commercial/Traffic | –$10,000 | –10% of value |
| Fronting Commercial/Traffic | –$20,000 | –20% of value |
| Basement/ADU SF | 0% or 50% credit of above-grade SF | 0% or 50% credit of above-grade SF |
Guidelines:
- Only apply one fudge factor at a time.
- Use fudging when strong comps are limited.
- Stay conservative: when in doubt, discount rather than inflate.
4. DOA (Dead on Arrival) Properties
Walk away if:
- In a flood zone (unless all homes in area are).
- Major easements or parcel restrictions.
- Zoning conflicts (e.g., duplex in single-family zone).
- Built into setbacks.
- Low ceilings (<7.5 ft).
- Odd/weird builds with no comps (octagon house, strange layout).
5. Oddbird Issues (Discount Required)
- Unusual architecture.
- Irregular or steep lots.
- Bad neighbors (junk yards, tarped roofs).
- Infrastructure nuisances (railroad tracks, highways, power lines).
- Stigma (crime scenes, deaths).
6. Common Pitfalls
- Speculative ARV (“The Wave”) – don’t assume appreciation will save you.
- Confirmation Bias – don’t cherry-pick comps to make a deal work.
- Wrong Side of the Tracks – never use comps across neighborhood boundaries.
7. 5-Step Comping Process
- Identify 3–5 comps using the rules (census tract, date sold, size, etc.).
- Confirm that the comps are not DOAs or red-flag properties.
- Break down the comps to ARV per square foot.
- Apply the ARV per square foot to the square footage of the subject property.
- Look for any houses currently for sale that help prove or disprove this analysis.