“Running the Numbers”: How to Value a Home
Have you ever heard someone say they are “running the numbers” when talking about real estate? Maybe you’ve felt a bit of urgency to learn how to “run the numbers” yourself, right?
Cue cat gif for fun
What if I told you that “running the numbers” is really just a fancy way of saying, “Let’s analyze the key details of this home”? It’s not rocket science—you can totally do it! And that’s exactly what we’re going to cover in this video.
This information is especially helpful if you’re considering buying a fixer-upper, but it also works if you’re just trying to figure out how much to offer on a home. Even if you’re just learning how to assess homes, this will give you a solid foundation to build on.
We’ll walk through an example of analyzing a fixer-upper and another where you’re deciding on an offer price. After watching this, you’ll have a clearer sense of how to assess a property’s value and whether it makes sense for you to make an offer. And remember, while you can do this online, the best way to get accurate insights is by walking through the property with your realtor. Do this only for homes you’re seriously considering.
So, let’s dive in.
Step 1: Gather the Key Data
The first thing you’ll want to do is gather all the data available to you. You’ll need to “run those numbers”—or in other words, assess whether the home is worth it to you or how much you should offer.
• Sales price
• Number of bedrooms and bathrooms
• Price per square foot
• Days on market
• Does it need cosmetic upgrades?
Pro tip: Bring your “scorecard” to showings to help remember key details about the house. This will help you stay organized and focused.
Step 2: Look at Comparable Homes (Comps)
Next, check out what other homes in the area have sold recently—these are your “comps.” Ask your realtor to send you a list of comps. There’s no exact right or wrong way to do this, but I like to look at a few types of comps.
For example, I might check out comps that are very similar to the home in question, but only from a few blocks away. Alternatively, I might broaden my search to the entire zip code to see what’s been sold and at what price. If you’re looking at a fixer-upper, it helps to look at the highest-priced homes that have sold in the area. This can give you an idea of how much you could invest in renovations and still come out ahead.
Example 1: Analyzing a Fixer-Upper
Let’s walk through an example to see this process in action. I’ve been keeping an eye on a renovation project on my street. When it was finally listed, the price was $645,000. At first, I was shocked! That’s a lot more than I expected for this neighborhood. But then I remembered a similar home across the street—a 2-bedroom, 1-bath fixer-upper that had been on the market for a year. A year earlier, I had looked at it and thought it was overpriced. But now, the renovated home had multiple offers and went under contract just two days after being listed.
Naturally, I wanted to investigate further. I “ran the numbers” to see how much this fixer-upper might be worth and how much I could potentially invest in renovations.
Here’s what I did:
• I looked up comps for similar 2-bed, 1-bath homes in the neighborhood.
• I focused on the highest-priced ones to see how much I could reasonably spend on a renovation without overpaying.
• The house was listed for $400,000. I found that a similar home, but with an additional bedroom and bath, sold for $645,000.
Let’s do some quick math:
• $645,000 - $400,000 = $245,000
That’s a lot of equity I could build if I added a bedroom and bathroom! So, I calculated that if I spent $100,000 on renovations, I would still be at $500,000 total—and that’s $145,000 in built-in equity.
Of course, I’d have my realtor help by getting inspections and contractor quotes to make sure the investment would be worth it. But based on this simple math, I could see that buying this fixer-upper, renovating it, and flipping it could be a great move.
Example 2: A Home That Just Needs Some TLC
Let’s shift gears and look at a different scenario. Joanie and Michelle are first-time homebuyers who have found a home they really love—but there are a few things they’re not so keen on. The windows are old, and the flooring is dark brown tile throughout. It’s not ideal, but the home is otherwise perfect for them.
Here’s the data for the home:
• 3-bedroom, 2-bath
• 1,300 sqft
• Sales price of $387,000 (listed 20 days ago, no offers yet)
• Lot size: 0.135 acres
• Older windows (not energy-efficient, but functional)
• Tiled floors (they plan to replace them)
Joanie and Michelle’s realtor sent them comps from the area—similar homes that have sold recently. The majority of homes in the area had sold between $375,000 and $380,000, typically in 12-15 days.
After reviewing the comps, Joanie and Michelle realized that the house was priced a bit above the average. But they still loved the lot size and the potential to add a tiny home in the backyard later, which could significantly raise the value. So, after discussing it with their realtor, they decided to offer $375,000, with the option to go up to $380,000 if necessary.
They also got an estimate for the windows and floors—around $11,000. With this insight, they felt confident in making an offer.
The Bottom Line
And there you have it! Joanie and Michelle now have the knowledge to make a confident offer, and you now understand how to “run the numbers” too. Remember, running the numbers isn’t complicated, but it does take time and attention to detail. Whether you’re considering a big renovation project or just trying to decide what to offer on a home, analyzing the key details will help you make a smart, informed decision.
If all of this feels a little intimidating, don’t worry! It’s completely normal. With more practice, you’ll get the hang of it and start feeling more comfortable with the process. Real estate isn’t rocket science—it’s all about understanding the numbers and making them work for you.
Ready to get started? Stay tuned for the next video where we’ll dive deeper into more tips and tricks for homebuyers.
