Sarah Jarvis Team at One South Realty

at One South Realty

One South

Price per Square Foot | A Critique

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sfThe most important thing to remember about price per foot is that it is not linear.

The next most important thing to remember about price per foot is that it is not linear.

What do I mean?

Just because a 3,000 SF house is worth $400,000 does not make a 6,000 SF house worth $800,000 or a 30 SF house worth $4,000.

So often, people get hung up on price per foot as the absolute gospel when it comes to house valuations.  Price per foot, while a tool that can be very insightful when applied correctly, tends to act as a point of contention to ‘price per footists’ when the price for a home exceeds the price per foot within a neighborhood.  For whatever reason, a price per foot average within a neighborhood tends to drive decisions far more often that it should.

Here are things to take into account:

  • For price per foot to be at its most effective, lot prices, finishes, age, materials and other features (garage sizes, basements) must be very similar.  Examining homes in the same suburban neighborhood with similar features will be a good use of $/SF.  Using it to compare a brick ranch built in 1957 to a colonial built in 1987 is not the right use.
  • Comparing a home with a finished 3rd floor or basement against a home with unfinished areas is wrong.
  • Comparing home built prior to 1940 or so is really not a good idea as time has really eroded the accuracy of the measurement.
  • Using $/SF to compare different builders is also an issue.  Buying a home built by Ryan because it is cheaper by $10/SF than Boone is a very flawed decision.

I like to use $/SF as tool in the following manner:

  • $/SF can be used to establish neighborhood minimums and maximums.  This needs to be looked at in companion with aggregate sales prices in the neighborhood.  In other words, if a neighborhood has a average $/SF of $160 but a maximum price of $300,000, then be careful of a home that is 2,000 SF priced at $360,000.
  • $/SF works really well in new construction within the same neighborhood.
  • $/SF is a helpful tool in renovation or addition properties.  It can help the decision process greatly.
  • $/SF is helpful when it benefits you and a pain when it does not.  I use it to defend appraisals and listing prices or to argue down pricing for my buyer clients.

When the dust settles, using $/SF to make a decision is a bad idea.  When it is one part of an overall analysis, then it can be powerful.

We Bought an Office!

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2012-12-11 12.16.07We recently closed on 2314 W Main Street as the future home of One South.

Sometimes known as the Richmond Kickers Building (as it was at one time the home of the soccer team and the mural on the side and front are well known), it is an 8000 SF warehouse that is being renovated into our new home.

When complete, we will have 4500 SF dedicated to office use and 5 apartments.

 

Buying for the Student – The VCU Housing Options

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VCU housing
The TriBeCa Brownstones were built on land close to VCU and many were purchased by a parent for their child as a dorm alternative.

The Best VCU Housing Option – Buying a ‘Dorm’

I would like to offer the following debate to the parents of VCU students and their Medical School counterparts who are coming to Richmond this summer (or who have already arrived) and who need to make a decision about VCU Housing…

You should buy a house or condo.

Now I understand that my position on this is not without bias. I am a Realtor who sells a lot of property in and around both the VCU Campus and the MCV/VCU Health Systems Campus. It benefits me when you buy. It does not really benefit me when you rent. I am now done disclaiming my conflict of interest.

That being said, it does not mean that I am wrong about what is the most prudent decision regarding VCU housing options.

I am not going to give you the rent vs. buy calculator argument because we (Realtors) can all tweak the numbers until we can get it to show what we want it to. Depending on inflation, appreciation and tax effects, I can get one of those things to spew out some amazing numbers. Those are interesting tools and they have their place. This is not a debate for the rent vs. buy calculator.

My argument is more macro in nature and relates to the following set of circumstances:

  • Prices are down 20-30% depending on your market and asset type
  • Interest rates are being held down (somewhat artificially) by the Fed and are still hovering around 5%.
  • College tuition and college room and board is going up despite the rest of the economic world moving the other direction.

Renting a property for roughly $1.30 per SF per month (which translates to about $1,200-1,400/mo for the typical 2-bedroom apartment in City of Richmond in or around the VCU campus) or buying a property for about $190-210 per square foot yields about the same monthly cash payment at the end of the day.

Which one gives you some upside? It is pretty obvious that buying has the promise of upside.

I know that the counter argument is simply that many are not sure that the pricing declines behind us.

The facts are as follows:

  • On January 1 2009 there were over 400 condos for sale in Richmond, VA
  • On January 1 2010 there were less than 200 condos for sale in Richmond, VA
  • On January 1 2011 there were still roughly 200 condos on the market in Richmond, VA.
  • No new projects have come to the market since the adjustment in 2008.
  • Inventory in 2013 has been somewhat constant hovering around 100-130 units on the market at any one time

Life, at least financial life is about managing/pricing/understanding risk. Betting large sums of money on risky endeavors with no upside is not smart. Betting medium sums of money with a low cost-of-capital in a market that has balanced itself with no competition coming on line sounds like a pretty decent bet to me.

Don’t let the national media scare you off. While extremism and negativity sells, I have yet to see report on the college-driven housing market on 60 Minutes. As a matter of a fact, the student housing market is one of the healthiest housing sectors in the market and owning a home that is underpinned by a rental option to students is a way to remove a great deal of risk from the equation.

If really do have a VCU housing decision in your future, lets discuss the options.

804.201.9683

How Do I Schedule a Showing?

I am Kendall C. Kendall, Client Care Coordinator for the team. I am a licensed Realtor and it is my job to answer questions and schedule showings for the properties shown on our sites. Here's our call policy.
kendall@richmondvamls.net

804.909.0184

How Do I Determine What I Can Afford?

With over a decade of mortgage industry experience, Chris knows what it takes to provide the very best service for each of his clients and truly believes in forming lasting relationships with his customers.
Cowens@southerntrust.com
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