Find out how to Comp a Home (EVEN Throughout a Housing Correction)

Dave:
Hey, everybody. Welcome to On the Market. I’m your host, Dave Meyer, joined at present by Jamil Damji and James Dainard. How are you guys doing?

Jamil:
Superb. How are you?

Dave:
I’m nice as a result of this present goes to be fully self-serving and an abusive energy on my behalf, as a result of I need to study one thing about actual property from you guys. I invited you right here so I can study, however then we’ll file it and so all of our listeners can get pleasure from and study as effectively.

Jamil:
Superior.

James:
I’m excited as a result of I really like speaking about offers. It’s a deal junkie day. We get to have a look at properties and reduce them up.

Dave:
Precisely. In the event you all don’t know, I’ve been investing for 12, 13 years, however I actually simply put money into long run offers. I’ve by no means wholesale a home, I’ve by no means flipped a home, however I need to. A part of internet hosting this present, which is nice, is that I get to speak to those very attention-grabbing individuals, however you additionally, or at the least I, get excessive FOMO each time I discuss to you guys or a few of these different buyers as a result of I would like and get to listen to about all these cool new methods. These aren’t precisely new, however all these nice methods which can be working for you all. I need to partake.
I’ve been serious about flipping my first home with a accomplice, as a result of I dwell in Amsterdam so I’m not going to be actively doing it, however I actually have some worry about it and I’d like to discover ways to comp higher, significantly as a result of we’re on this very bizarre market that’s correcting and now it’s slightly bit hotter as of after we’re recording this in early April, nevertheless it’s very complicated to me. I’m hoping that you just guys can educate me slightly bit about comping, significantly in this sort of market.

Jamil:
Properly, Dave, it simply so occurs that comping is likely one of the pricey passions that I’ve. It’s attention-grabbing, individuals have so many enjoyable hobbies. They fly fish. As an illustration, James Dainard likes to yacht.

James:
Sure.

Jamil:
I discover a zen-like meditative launch by comping homes.

Dave:
That I consider. I undoubtedly know you’ve got a real ardour for this. James, is similar true for you? Do you like this?

James:
I’m with him. I do love this. I’m a real deal junkie, taking a look at offers all day, however I get the alternative impact. I don’t get zen. It’s consuming 10 Rockstars. After I discover that deal, my adrenaline goes by the roof. It’s not zen, it’s the alternative.

Dave:
Properly, have you ever drank 10 Rockstars proper earlier than you comped that deal?

James:
It depends upon the time of day. Within the morning, I gained’t be that deep in, no, however normally I do attempt to search for my offers and comp issues very first thing within the morning and the tip of night time. 7:00 within the morning, 10:00 PM at night time, open the day, shut down the day. I suppose it’s a little zen as a result of it places me to mattress.

Dave:
There you go.

James:
I really feel like I’m not lacking something if I do this final little examine.

Dave:
Jamil, what’s it that you just love about comping a lot?

Jamil:
Properly, I believe the factor that’s the most tasty to me with comping is that it’s like math. In the event you comply with the system and for those who plug in all the best variables and put the puzzle collectively proper, you possibly can provide you with a really particular reply. Though comping will be checked out as an artwork kind, in addition to very scientific, the attractive factor is, is that creatively individuals can method it from other ways, however we very, fairly often come to the identical reply.

Dave:
That method. I’ve at all times revered it, however I believe what’s occurred over the previous few years has confirmed that it is a actual talent that buyers really want to study. As a result of from my perspective, I’ve some coaching and expertise with machine studying and writing algorithms and it’s actually attention-grabbing to see that. Though a pair years in the past, I might’ve assumed that machines would’ve been in a position to do that and do that higher than people. What’s occurred with iBuyers like Opendoor and Zillow has confirmed that that’s not true and that there’s nonetheless a talent and information that you just as an investor can study and have to study to do that very well. I’m very excited to study slightly bit about this from you guys.

Jamil:
Superb.

Dave:
All proper. We’re going to take a fast break, after which we’re going to come back again and James and Jamil are going to show me the right way to comp. All proper. What we’re going to do is James and Jamil each have completely different experience and specialties. Every of them are going to share with us their comping philosophy, and we’re going to start out with Jamil. Jamil, are you able to simply inform everybody, for those who’re not acquainted, what comping is?

Jamil:
Yeah, completely. Comping, mainly it’s quick for evaluating, proper? We’re evaluating two homes to get a dedication of the worth of 1. To ensure that us to grasp how a lot one thing might be value as soon as worth is put into it, so like an funding is made to beautify it or to deliver it as much as a present retail normal, you’ll want to have some fairly widespread traits to have the ability to say, “This home and this home examine.” The best way I like to consider it’s you need to make it possible for if you’re rising apples, as an example, that the apples that you just’re rising are the identical apples grown from the identical orchard in the identical tree, in the identical soil, in order that it’s all very, very, very alike.
That’s how one can say, “This dwelling might be value this a lot as a result of these components all line up.” Now, right here’s the factor, it’s uncommon for the whole lot to line up. It doesn’t occur that usually. Now, once more, builders misplaced creativity… From early 1900s to the mid 1900s, like 1950, 1960, there was a lot selection in houses. You’ll have a Victorian subsequent to a Colonial subsequent to a Tudor. All these builders had all of those stunning architectural designs that may make neighborhoods really feel so completely different. As constructing grew to become extra commercialized, you’d discover these grasp plan communities would have 5 homes.

Dave:
Yeah, they might simply reverse the format. It could be very complicated to stroll into two of them.

Jamil:
It makes it simpler for us to check homes as we’ve gotten farther and farther away from the inventive course of. However as a result of issues don’t essentially at all times line up, now we have to make changes. We’ve to have the ability to say, “Okay, if this home has an additional lavatory, or if it’s lacking a bed room, what would the adjustment in worth be?” What I did, Dave, is I sat down with 100 appraisers throughout the nation, as a result of as chances are you’ll or will not be conscious, KeyGlee, my wholesale firm, we do enterprise throughout the nation.
I want to have the ability to worth houses throughout the USA and do it fairly precisely in order that I don’t make errors and I’m not buying houses and overpaying for houses, or that I’m additionally not undervaluing houses and never providing sufficient. I want to have the ability to see what’s the most quantity I will pay for this home on this situation in order that I could make good enterprise selections. I can even then assist the oldsters which can be part of my teaching or my franchisees make good enterprise selections. In interviewing these 100 appraisers, I discovered some quite common guidelines, and these are guidelines that nearly each appraiser follows.
Now, for those who’re watching this on YouTube, you possibly can most likely discover the doc within the description, or for those who’re listening to this on the podcast, simply examine the present notes and there’ll be directions on the place you will get this doc, however I’d like to point out you ways this appears to be like.

Dave:
Jamil, when you’re pulling this up, are you able to simply inform us why you’ll want to be so good at this as each a wholesaler and a flipper? What’s the significance of being good at comping?

Jamil:
Properly, nice, nice query, Dave. The explanation why it’s important to be good at comping is as a result of as actual property buyers, we try to find out how a lot one thing might be value, if there’s an precise alternative right here. And if we wish to discover a chance, we want to have the ability to know what’s it value earlier than a threat is taken or earlier than cash is invested. As a enterprise individual, which for those who’re an actual property investor, you’re a enterprise individual, as a enterprise individual, it is sensible so that you can have an excellent understanding of how a lot issues are value.

Dave:
If I’m going to go flip a home, there’s a number of variables. I want to grasp what the acquisition worth is, what the rehab prices are, after which the third one, which is how a lot I can resell the property for finally, which is the place comping is available in, as a result of you will get an excellent concept of what you’re going to purchase one thing for. Ultimately you’ll know precisely what that’s.
As you grow to be extra skilled in flipping, which I’m not, I assume you get higher at estimating rehab prices. That is simply looks like an important talent for each wholesalers and flippers and actually any sort of investor that’s doing any worth add. Even for those who’re going to do worth add and maintain onto one thing and hire it out, you continue to need to be good at this.

Jamil:
Completely, sure. From the standpoint of a wholesaler, why you’d need to know the right way to comp is wholesalers are promoting potential. We’re taking a look at a property and saying, “That is the potential of this. In the event you did this renovation or for those who spent cash right here and stuck this right here, the home might be value this a lot. That’s why I’m owed or that’s why I consider that it’s best to pay me 5 or $10,000 to present you this chance to flip as a result of I’m exhibiting you what the potential that exists on this property is.”
In the event you’re a flipper, you’ll want to know, if I purchase this home for this a lot cash and I spend 50 or $60,000 renovating the home, will I really be capable of promote it for this worth and earn money, or am I going to only break even and lose cash? In the event you’re a purchase and maintain investor, if you’re shopping for a house after which renovating it after which hoping to refinance it and pull your money out, you’ll want to know what it’s going to appraise at. That’s why these appraisal guidelines are so essential. No matter whether or not you’re a wholesaler, a repair and flipper, or a purchase and maintain individual, it’s essential so that you can perceive the right way to underwrite and decide worth.

Dave:
Stunning. I like it. You have got some appraisal guidelines that you just use mainly for comping throughout the nation, is that proper?

Jamil:
Appropriate. The appraisal guidelines, once more, like I mentioned, have been derived from interviewing 100 appraisers throughout the nation, and these have been the commonalities that I discovered. Now, earlier than we transfer any additional, I do need to say, for 2023, we’re wanting to make use of comps which can be no older than six months. Proper now, appraisers, actually, they would favor to make use of a comp that’s no older than 90 days, however they may go as previous as six months, however no older than that as a result of we’re all conscious the market has shifted and you’ll’t use comps which can be older than six months as a result of the course of the market has modified.

Dave:
Are you able to simply give us some context? In regular occasions, how previous of a comp would you utilize?

Jamil:
Properly, earlier than the market turned, appraisers would have gone again so far as 12 months as a result of the market was going in a single course. Right here’s the factor, if there was a comp that they discovered that was 11 months previous, as a result of the market was nonetheless getting into the identical course, which means issues have been value greater than they have been 11 months in the past, you might use that comp from 11 months in the past as a result of the home was solely value greater than what that quantity was giving us.
An appraiser, if there weren’t a whole lot of gross sales accessible or a whole lot of gross sales exercise accessible, as a substitute of leaving a subdivision, which we’ll speak about right here shortly, as a substitute of leaving a subdivision, appraisers would time journey. They might really return. You may see this proper right here. It was higher to time journey than go away the subdivision, whereas now it’s really higher to depart the subdivision than time journey.

Dave:
That’s attention-grabbing. In a traditional time, let’s say in 2021, if an appraiser goes out and creates a comp they usually discover a fantastic comp from 9 months in the past, with how shortly the market was rising, have been they adjusting it, like saying, “Okay, we all know the market typically went up 5 to 10%?” Actually if there’s no good ones within the space, are they typically simply older and never considering the final six, 9, 12 months of information?

Jamil:
Yeah, they’re not going to only offer you appreciation with out proof. The explanation for that, Dave, is as a result of the job of the appraiser is to guard the lender.

Dave:
They’re being conservative.

Jamil:
Except there’s precise proof to show that worth exists, they’re not going to only extrapolate it for you and offer you a further 5 or 7% of worth on your own home. As a result of once more, the way in which that it’s wanting, they need to shield the asset, they need to shield the mortgage, they need to make it possible for their quantity is correct, they usually’d desire their evaluation to be extra conservative than correct. Now, taking a look at these appraisal guidelines, once more, we at all times need to attempt to keep inside the identical subdivision.
That’s one thing that appraisers will sometimes do. I’ve seen many would-be wholesalers or repair and flippers make errors the place they may ignore a comp inside the subdivision, so a viable comp inside the subdivision, they usually’ll really go away the subdivision to inform a greater story of worth.
Truly, wholesalers are very, very, very responsible of this as a result of they’re making an attempt to share or making an attempt to color an image of what a property’s potential is and they’re going to simply ignore, they’ll ignore a home in the identical subdivision behind our topic home or a pair doorways down and decide to make use of a sale from a very completely different neighborhood simply to try to show that this home if having an funding made to it might be value $100,000 greater than what it ought to be. Usually talking, you don’t need to go away the subdivision.

Dave:
As a result of in any other case, you possibly can comp one thing that’s perhaps because the crow flies a tenth of a mile, proper?

Jamil:
Sure.

Dave:
It appears to be like prefer it’s shut, nevertheless it’s in a special subdivision and may need completely different high quality of houses or only a completely completely different character or no matter it’s.

Jamil:
Precisely. Have you ever ever been in a neighborhood, and that is very, quite common in these main metros in the USA, however you ever been in a space the place you stroll for 2 minutes and the neighborhood simply fully modifications?

Dave:
Yeah, in fact.

Jamil:
A number of streets over it, we’re speaking about night time and day distinction.

Dave:
Completely, yeah.

Jamil:
That is the explanation why, proper? You don’t need to be taking a look at properties outdoors of your subdivision if there’s comps that exist there, as a result of issues can change one block over. It’s humorous, right here in Phoenix, Arizona, now we have these historic districts. You may actually be taking a look at a home in a historic district and one road over, it’s not in a historic district, you’re outdoors of the historic district, and the values drop by $100,000 or extra. It’s actually essential to concentrate to those issues. Once more, you need to attempt to keep inside the identical subdivision. One other rule that appraisers will use is that they gained’t use or examine properties which can be greater than plus or minus 200 sq. toes aside in measurement.
Right here’s the explanation why. As a home will get bigger, its greenback per sq. foot worth begins to say no. Smaller homes have a better greenback per sq. foot worth. What many wholesalers who’re simply getting began by chance do is that they’ll see a renovated comp, say it’s 1,000 sq. foot home, and let’s simply say the topic home they’re taking a look at is 3,000 sq. toes. It’s the biggest home within the neighborhood. They’ll mistakenly take the greenback per sq. foot of that 1,000 sq. foot home they usually’ll apply that greenback per sq. foot to a 3,000 sq. foot home.
Now they’ve acquired this loopy quantity they assume this home is value as a result of they used an incorrect greenback per sq. foot extrapolation. You may solely use the greenback per sq. foot extrapolation plus or minus 200 sq. toes.

Dave:
That is sensible to me. If it was a giant home, let’s say it was 4,000 sq. toes versus 4,400, does the identical precept nonetheless apply?

Jamil:
Yeah, I believe that that rule begins to get slightly bit much less constrictive as you get bigger in dwelling. It could make sense to me that you might use a 4,400 sq. foot comp and a 4,000 sq. foot home. That is sensible. That 10% does really feel proper. Nonetheless, it’s nonetheless much less correct. If yow will discover… Once more, the extra you break these guidelines, it doesn’t imply you’re improper. It simply signifies that your worth is turning into much less and fewer and fewer correct.

James:
Worth per sq. foot’s like an excellent worth examine, however I wouldn’t ever use it to place the worth on. Sometimes, you possibly can see the place the clusters are in these segments. 3,500 to 4,000 goes to be round this vary, 2,500 to three,000. You go in ranges of 10 to twenty%, after which you possibly can slender that worth per sq. foot down slightly bit extra.

Jamil:
Precisely. The following factor that you just need to do is you’re at all times desirous to just be sure you need to examine properties which can be of the identical sort. Let’s simply say as an example, you’ve acquired a single story ranch, and your comps are primarily two-story homes. They’re not the identical, proper You need to examine single story ranches to single story ranches. You need to examine two-story homes to two-story homes. You need to examine Colonials to Colonials, Tudors to Tudors. You need to make it possible for your property sort is similar. Once more, one other instance right here in Phoenix, Arizona, the pitch of the roof may even qualify as a purpose for worth discrepancy.
As an illustration, single story homes right here in Phoenix, if they’ve a pitched roof, are value roughly 10% greater than flat roof houses. You need to examine homes which can be of the identical property sort. Now, once more, guys, the way in which to know for those who’ve left a subdivision or not, I simply comply with this rule. If I’ve crossed any main roads, there’s an opportunity I’ve left the subdivision. That’s it. I can maintain myself fairly sincere and I can maintain myself fairly correct by ensuring that I’m not crossing any main roads. Now, for those who’re utilizing any comping instrument, sometimes main roads are completely different colours.
You may simply see, oh, the thickness of this line or the colour of this line is completely different from all the opposite road traces or road colours, so this should be a significant street. No matter comping instrument you’re utilizing, simply attempt to get an understanding of what the legend is or what the completely different colours or the completely different widths of the road stand for. After which the following factor that you just need to take note of is the development expertise or what I name construct technology. For probably the most half, appraisers will solely examine houses which can be inside plus or minus 10 years of development of one another.
And that’s as a result of the expertise of constructing has modified and it modifications so quickly. Just about each 10 years, the development expertise is totally completely different than it was 10 years prior. Now, the place this rule doesn’t actually apply is within the late 1800s to the early 1900s. There wasn’t nice strides in constructing expertise made between 1870 and 1930. We have a tendency to seek out appraisers use comps pretty liberally in these late 1800s and early 1900s. However when you get previous like 1930, they sometimes don’t like to check houses which can be greater than 10 years aside in construct development 12 months.

Dave:
That is sensible. That makes a whole lot of sense.

Jamil:
Now, once more, as I’d talked about earlier, you’re not going to have the identical home on a regular basis. Let’s simply say, as an example, your topic home is a two mattress, two bathtub, and the comp that you just’re taking a look at is a 3 mattress, two bathtub. You want to have the ability to accommodate for that bed room’s worth. Or let’s simply say your topic is a 3 mattress, one bathtub and the comps you discover are three mattress, two baths. You want to have the ability to accommodate for what that rest room’s worth is. These are common values that appraisers are utilizing for bedrooms, bogs, swimming pools, and garages.
For a bed room, that worth will be value anyplace from 10 to $25,000, relying on the value level of the home. A rest room is value plus or minus $10,000. A pool, this worth is the one that truly actually irritates me probably the most. An appraiser will solely offer you plus or minus $10,000 in worth for a pool right here in Arizona. I’ve constructed many swimming pools and I’ve by no means constructed a pool for $10,000. They value upwards of 30 to $50,000 to put in, but an appraiser will solely offer you $10,000 in worth for it right here.

Dave:
I heard as soon as that swimming pools deliver down the worth of homes in some neighborhoods. I’m positive in Arizona that’s not true, however I grew up within the Northeast and other people by no means constructed swimming pools as a result of they apparently introduced down the worth of houses.

Jamil:
Relying on the place you reside and the upkeep required, they’ll completely be a hindrance.

James:
And that’s true. That was true. In a Pacific Northwest, you bought a pool, that’s a detrimental, greater insurance coverage, harmful. However ever for the reason that pandemic, that modified. It’s rapidly swimming pools acquired you a premium in Washington.

Dave:
You utilize them like two weeks a 12 months in Washington.

James:
And never solely that, there’s not very many pool corporations right here, so that you’re paying two to a few occasions greater than you’ll pay in Arizona for a pool. I acquired a pair quotes and I used to be like, no, not doing it. I’m filling this factor in.

Jamil:
A storage is value plus or minus $10,000 and a carport value plus or minus $5,000. Now once more, this final adjustment is one thing that we need to think about and it differs primarily based on worth level. I’ve seen many new wholesalers, new repair and flippers make this error. Guys, take note of this. If you’re siding, backing, or fronting site visitors, business or multifamily, it’s important to make an adjustment in worth. Let’s simply say, as an example, you’re within the worth level below 500,000. If you’re siding or backing site visitors, business or multifamily, you need to alter down $10,000. If you’re fronting site visitors or business, you need to alter down about $20,000.
However then if you get into extra luxurious worth factors over 500K, if you’re siding site visitors or business, provides you with a ten% hit. As a substitute of 10,000, it’s 10%. In the event you’re backing site visitors, multifamily or business, it’s 15%. In the event you’re fronting, it’s 20%. I really only recently, we by chance dedicated to and took down a home that was not solely on a significant street, but in addition fronted some business. The comp that we had used to find out worth was one road behind us and the distinction in worth was over a $100,000. When all of it shook out and we have been really capable of promote the property, we had missed the mark by a couple of 100K.
It was proper on the cash at 20% for a worth adjustment due to the site visitors and the business that was there. Now, the final little bit that I need to say and that’s normally only for any further dwelling models or basements, sometimes what I’ve seen, and James goes to have a special evaluation of this, however sometimes what I’ve seen is appraisers will sometimes solely offer you 50% of worth for basements or ancillary dwelling models relying on the extent of end. However once more, that’s regional, and in order that worth could or will not be completely different in numerous markets.
It’s one thing that you just undoubtedly need to examine into with repair and flippers or appraisers in your native space to see how a lot worth they’ll offer you for a basement renovation and for any ancillary dwelling models.

James:
Once more, that’s an enormous level that Jamil simply identified, and it’s regional, so you bought to look into it. However when you’ve got a basement, when you’ve got 1,000 sq. toes up and 1,000 sq. toes down, they’re solely going to depend that sq. footage for worth functions at 50%. You’re taking a look at a 1,500 sq. foot home slightly than 2,000, until you’ve got full egress going out of the property. In Washington, when you’ve got a full egress, you dig down the basement, you place sliders in and you’ll egress out, they’ll offer you 100% worth.

Dave:
Like a walkout.

James:
A walkout basement. Yup.

Dave:
What a couple of DADU?

James:
DADU, they offer you 100% worth for the sq. footage in Washington, after which they’ll have a look at it… They do it two other ways. Lots of occasions they do it on a rental method for those who’re retaining it in… Properly, it depends upon the lender that you just’re placing collectively, however they’re going to make use of it primarily based on both rental method for those who’re retaining it as a rental. However in Washington, we will condominium them off and provides them their very own parcels, and they also’ll give us full straight worth. They have been extraordinarily tough to comp two years in the past as a result of there wasn’t very many. Now there’s much more.
What they used to do is definitely take small single household homes on small heaps after which city dwelling comps and they’d mix them collectively to get the worth previous to having the information factors. Now, fortunately, now we have much more information factors. It’s simpler to place values on them.

Dave:
I used to be curious, as a result of for everybody listening, DADU stands for indifferent accent dwelling unit, mainly slightly second unit, name it a mother-in-law suite, one thing like that, that’s not connected to the first dwelling. In Washington, as I perceive, James, they’ve “upzoned” a whole lot of the only household plots so to add these items. They’re speaking about doing the identical factor in Colorado proper now. I used to be curious as a result of that appears fairly essential for comping for those who have been going so as to add these varieties of issues, what sort of worth you get for it.

James:
Oh, yeah. Extraordinarily priceless to grasp that.

Jamil:
In Arizona, the DADUs are nonetheless solely getting 50% of worth. Sadly, I believe and it simply has to do with stock and we’re not as constricted because the Pacific Northwest or locations like Los Angeles the place that DADU has a significant promoting level, right here in Phoenix, Arizona, they’re nonetheless solely supplying you with 50% of worth for them.

James:
Phoenix is lots larger metropolis, so the density is just not as… Seattle is tight, so that they’re everywhere in the density.

Dave:
All proper, so are these your guidelines, Jamil?

Jamil:
These are the appraisal guidelines. I might extremely recommend that anyone who is basically planning on turning into a full-time actual property investor, you study these guidelines and also you commit them to reminiscence. The extra you comp, the extra you have a look at properties and attempt to decide how a lot stuff is value, the higher you can be at it. Getting good at comping doesn’t simply occur naturally. It’s important to apply at it. I might recommend placing in as many reps as potential so that you just get actually good at understanding worth.
For myself, David, I grew to become crucial individual in my firm as a result of I’m the most effective comper there. That’s it. I’m the one which they go to to make it possible for we’re not making a mistake within the dedication. I’m the one they go to to ask how a lot is one thing value. Due to that, I’m simply at all times going to be the most well-liked man.

Dave:
You’re a well-liked man for a lot of different causes past that, however that’s an excellent talent to have.

Jamil:
Thanks.

Dave:
All proper, effectively, Jamil, thanks a lot for sharing this. Once more, anybody who needs to take a look at the following pointers, Jamil has very generously made that accessible to everybody. You will discover these within the present notes or on biggerpockets.com. All proper, let’s go to James. From what I perceive, we have been speaking offline, James, you’ve got a barely completely different method, as a result of whereas Jamil is comping issues on a nationwide foundation and needs to be actually good at this with out intimate market information, Jamil, I assume that that is sensible.

Jamil:
Very broad, yeah.

Dave:
However James, as you at all times speak about within the present, you actually consider one market. How does comping change along with your type of investing?

James:
What Jamil is doing and what he simply talked about is so essential, as a result of I’ve been investing in different offers in different states too with different operators. Having these common ideas for a nationwide wholesaling or if you’re doing extra tract type houses, that may actually allow you to get by your offers shortly. Having these instruments are actually essential. For us, now we have the identical common guidelines, however we’re a metro flipping firm and we work inside infill areas, very tight density areas, which have a whole lot of focus of inhabitants in a small space. What which means is there’s much more variance in a small space.
While you’re wanting in Phoenix, Arizona, it’s an even bigger quick plat. You would possibly go into different subdivisions which can be lots larger. Whereas in Seattle, now we have to say typically road by road. While you’re coping with an costly market, the as is comparables are irrelevant to us. It’s all about what’s the potential of the property and the worth add that we will uncover to make this deal extra worthwhile.

Dave:
Are you able to simply say extra about that? What’s the distinction there with as is comps, and what’s your method? Does that simply imply you’re not restoring the home in its current format and also you’re pondering extra creatively about completely renovating, including new options, including new bedrooms, including new models? Is that what you imply?

James:
Properly, it’s extra what am I paying for the property? If I’m taking a look at a property proper now and I will pay let’s say 500,000 for it, if I am going on the MLS and I discover like for like comparables, which perhaps the house doesn’t have a completed basement and want some restore, what’s the as is worth like? What would that home promote on market in at present’s quantity for the situation that it’s in? While you’re in additional tract dwelling areas, the variance goes to be lots completely different as a result of the tract houses are sometimes constructed slightly bit higher. They’re newer, like Jamil was speaking about. They’ve the identical flooring plans. There’s not going to be as a giant of a variance on the as is for the transform.
It’ll be extra standardized. However in metro areas the place you’re sometimes ending extra space, including extra dwelling area and including extra worth, the swing within the comps are very dramatic. A 2,000 sq. foot home that’s solely half completed might promote for half of what a completed home would at that time. If I’m taking a look at extra broad areas, I’m nonetheless at all times referencing the as is. But when I’m in my core metro, I’m actually simply taking a look at what the buildout plan is, what’s my complete most build-in sq. footage, after which how do I get there with a scientific development plan, not simply grabbing comps after which placing the home again collectively.
Lots of the worth curated within the comps relies on what you’re going to do to the property and the way a lot heavy lifting it’s important to do.

Dave:
All proper, so inform us the way you do it.

James:
In metro areas, when you’ve got a whole lot of density, there’s not very a lot stock a whole lot of occasions. After which the opposite factor about these core metro areas like San Francisco, Seattle, Austin, they’re costly and there’s some huge cash down there. Lots of occasions simply shopping for a like for like renovation, if you’re shopping for a 3 bed room, two bathhouse and promoting it for a 3 bed room, two bathtub home, the margin is just not going to be there as a result of the purchase worth will simply be too excessive. For us in Seattle, we’re at all times taking and we’re taking a look at how can we enhance the worth. How we do that’s the very first thing that…
My common guidelines for comping a property is I have to be on the seek for how do I enhance this and discover that magical system and plan that’s going to get the best and greatest use. We’re at all times specializing in highest and greatest use, which goes to show in that worth add. However after we’re on the lookout for these items, step one we at all times do is pull the tax file, as a result of the tax file of the property goes to present us the overall specs to what we will construct out in there. That’s going to present us the completed sq. footage, the unfinished sq. footage, what the present bed room and loo counts are, what the buildable out plan might be to the place we will add these in.
If I’m taking a look at a home that’s 1,000 sq. toes upstairs, two bed room, one bathtub and I’ve 1,000 sq. toes within the basement, I’m probably not anxious concerning the two bed room, one bathtub as a result of I’ve 2,000 sq. toes that I can work in and I can construct no matter I would like in there. I can at the least most likely get a four-bed, three bathtub with the best development plan. I at all times pull the tax file as a result of I need to know what the shell of the property is, what’s my buildable sq. footage that I can work inside.
After which the following factor I need to do is have a look at the opposite core features, that are going to be 12 months constructed, as a result of that’s going to inform me what sort of development I have to do on that venture, how tough it’s going to be, what sort of upgrades I’m going to want to do the length of time. Once we’re comping, we’re additionally serious about the worth plan that we’re placing in as effectively. If I’ve a house inbuilt 1920, I do know that that property goes to require much more seismic upgrades as a result of the wooden is previous, the framing was completely different, which might add three to 6 months on my plan as effectively. The core comping can be telling me the right way to underwrite the deal throughout.
It’s not only for the worth. However as we pull the tax file, the core issues I’m taking a look at is buildable sq. footage, 12 months constructed and the period. I’m on the lookout for the type code of home. Is it a daylight basement? Is it a basement home? Is it a two-story? Is it a rambler? After which the opposite factor that we’re actually specializing in is what’s the lot measurement and what’s the zoning behind that? As a result of there’s a whole lot of hidden worth inside your land. That’s the place now we have carried out very effectively flipping is not only taking a look at like for like remodels and going, “Oh, I can construct this right here and that is what my margin is.” It’s the place is the hidden worth.
We spent a whole lot of time wanting on the lot, what the topography of the lot is, after which what’s the zoning in that particular metropolis, what do they permit for, whether or not we will construct further models. Can we subdivide it off? Or perhaps the lot is simply good in a metro space and it’s slightly bit outsized, which in metro, when you’ve got an outsized lot, you’re going to get an enormous premium, particularly with the pandemic and other people desirous to have a staycation. These issues make a giant distinction whereas I’m going by my tax file. All the time pull the tax file. Then we go proper to the road view as a result of I have to know, like what Jamil was speaking about, is you possibly can keep in subdivisions on these larger cities.
With metro cities, road by road can range dramatically, the place I might be one road over and the worth might be 20% extra after which I might go one other road over and that might be a further 10% extra. These make massive, massive variances on the road view. I additionally need to see what my neighbors are. As a result of throughout that point, if I’m going to promote a home, however I’ve perhaps crummy neighbors, that’s going to have an effect on my resale in an costly market by 5 to 10% typically, as a result of individuals are okay spending the cash on a property, however they need to dwell in it they usually need to have the ability to go. The road view tells me my neighbors.
It tells me what’s my road situation. Does it have sidewalks or not? That might be a 5 to 10% bump simply on livability really feel. These are issues it’s important to take a look at for as you’re comping as a result of that’s going to make an enormous distinction on how livable it’s. The opposite purpose we’re checking for sidewalks is as a result of that tells me utilities are there. That’s going to inform me what I can do with that lot as I’m taking a look at… If I’m on the lookout for hidden worth, however I’ve no utilities proper there, it might be too costly to usher in that further unit within the again.
These little issues can inform you a large number. Simply by occurring Google Road, I can see there’s going to be a ten to twenty% worth swing simply by taking a look at that. We go tax file, we have a look at the road, after which we begin digging into our comps, which goes, okay, that is what now we have, that is what we will construct out. After which we pull three units of comps each time. We’re going to drag on the unfinished area. We’re going to drag comps for the property with simply the completed area that we’re not including the area into the basement. Then we’re going to go highest and greatest use, which is wanting on the complete most sq. footage of the property and what can we match inside there.
After which that’s going to present us the second worth. After which the third worth we’re on the lookout for is the place is the hidden gold on the property. If now we have a 5,000 sq. foot lot with an alley within the again, which the Road View goes to inform me and it’s flat, in Seattle due to density, I can perhaps add a further dwelling unit there, which might dramatically change by numbers.
Each property we have a look at, we have a look at three completely different units of comps, highest and greatest use with growth, highest and greatest use with complete most sq. footage, after which highest and greatest use for a easy renovation the place you will get out and in of the venture, not transfer as many issues round, and click on the deal out sooner. As a result of typically constructing out the costliest greatest product is the worst plan due to the allowing and the time.

Dave:
Superior recommendation. Thanks a lot. James goes to share a take care of us, and we’re going to stroll by one of many latest ones, nevertheless it struck me when you have been speaking, James, and evaluating it to Jamil that these two completely different approaches to comping make a whole lot of sense relative to your small business mannequin. Jamil, I assume that you just hear James’ method and also you’re like, “That’s an effective way to do that, however that’s his job as a result of he’s the flipper.”
Whereas you’re the wholesaler and also you’re making an attempt to determine simply the fundamentals of how a lot it might get, as a result of it’s probably not sensible so that you can know what a flipper would possibly need to do by way of renovating or including, doing intestine rehabs or simply doing a beauty rehab. Is that proper, or is that this simply private choice right here?

Jamil:
Properly, I believe we completely do do what James is speaking about in sure pockets in our enterprise as wholesalers. Nonetheless, it’s a lot fewer of these varieties of offers the place we’re really chasing a deep worth add alternative. We’re extra within the quantity enterprise of promoting like for like. Hey, right here’s a 2,000 sq. foot, three mattress, two bathtub. Right here’s a 3,000 sq. foot three mattress, two bathtub. That is the ugly home. That is the lovable home. Cute home is value 500K. Purchase the ugly for 350.

Dave:
Proper. However then if the flipper does need to do the deep renovation, then they’ll. You’ve proven them that there’s worth simply doing the easy factor. In the event that they select to do the extra deep dive into this like what James is doing, then that’s as much as them.

Jamil:
Yeah. Once more, it’s pocket particular, metropolis particular. If the neighborhood requires it, as an example, the place I dwell right here in Phoenix, in Arcadia, now we have worth provides occur on a regular basis. You’re at all times taking a look at lot measurement, precisely what James talked about. In Seattle, you really can go very near 100% lot protection. Right here in Phoenix, 42% is max. You may solely cowl 42% of what lots measurement is. We’re nonetheless doing this comparable factor. The variety of cases that we are going to get that deep into it’s 5% of the time.

Dave:
All proper, cool. Properly, James, are you able to share with us the deal you bought?

James:
Yeah. We really simply closed on this. Randomly, after I did my first underwriting, I didn’t just like the deal in any respect, as a result of I flew by it actually fast and I used to be like, effectively, it’s a whole lot of work for not that a lot cash.

Dave:
How’d you discover the deal, by the way in which?

James:
How we discovered the deal was really a vendor, he’s a builder in Washington, and we’ve boughten 18 houses from him over time as a result of we make it really easy. From an investor standpoint, if you’re doing B2B with different buyers, it’s a neater transaction. He understands the maths. We’ve our math. We make it very simple on him. He’s a really established investor. However as a result of we’re simple and we will be aggressive and his skillset isn’t doing renovations, so he doesn’t need to do all the worth add, so I can do it for lots cheaper than him. Lots of occasions he simply known as me up and we simply did one other deal.

Dave:
Good. Superior. All proper. You didn’t prefer it at first although?

James:
I didn’t prefer it at first as a result of I went by my floor underwriting actually shortly, and the reason is is as a result of the placement it was in, it was on a outsized lot. He known as me up and he says, “Hey, now we have this home. It’s been a rental property of ours for 35 years.” It was a two bed room, one bathtub home, 760 sq. toes on the primary flooring, after which there was 760 sq. toes within the basement that was completely unfinished. I’m taking a look at that property and I’m going, “Okay, effectively, I’ve a decent footprint home. Not the most effective factor for resale.” These are issues I’m at all times taking a look at after I’m going by a deal is not only what’s the sq. footage, the place is the sq. footage.
As a result of when you’ve got a 2,000 sq. foot home with an unfinished basement that’s 300 sq. toes, that’s really going to be much more livable than a 2,000 sq. foot home with 1,000 up and 1,000 down. At first after I checked out this, I’m like, effectively, I acquired roughly a 1,580 sq. foot home, nevertheless it’s not going to dwell very well. It’s going to be tight, two essential flooring, small bed room, small bogs. That’s not nice for marketability. That was the primary method I checked out it. I’m like, that’s going to be sort of tight. It was in, I might say, a B type neighborhood of Seattle, not the prime half, nevertheless it’s in a path of progress the place market values have carried out effectively.
However that’s additionally the markets that compressed lots during the last six months. I wasn’t itching to be on this actual location as a result of it was a weaker pool. At first I used to be like, effectively, I can purchase this home. He needed to only get a quantity out of me. The primary issues we did is we regarded on the sq. footage, 740 up, 740 down. I knew what I might work with. After which I additionally knew that I had a daylight basement home as a result of I had egress out, however then a part of the sq. footage is just not going to be above grade. Then what we did is as soon as we checked out these comparables, I pulled two units of comps.
The primary one was for a 740 sq. foot home with an unfinished basement that was fully renovated, nonetheless new roofs, new home windows, new plumbing, new wiring, and an establishing worth at that time.

Dave:
Did you say 740 sq. toes?

James:
It’s a decent one, yeah.

Dave:
Oh, okay.

James:
It’s roomy.

Jamil:
I believe the best phrase is cozy.

James:
Cozy, sure. Very cozy.

Dave:
Very cozy.

James:
Once we pulled up these comparables, I’m taking a look at it two methods. I’m going, okay, effectively, the explanation I like taking a look at it this fashion is as a result of it’s quick. I can have that home renovated in six months, again to market. I’m promoting that. I can put out my cash, get it again in six months. It’s an excellent velocity. The problem I used to be having was was these comparables have been solely about $620,000 on the time. I knew he was desirous to be round 500. That’s not going to pencil in any respect for us. Additionally, that was going to require me to again my numbers down and be at a proposal worth of round extra of 390 to 400 to him, which I didn’t really feel was an excellent worth to the vendor.
I knew that wasn’t an possibility as a result of it wouldn’t work for the vendor. So then we went to the following set of comps, which was gutting the home all the way in which down the studs as a result of the layouts have been slightly awkward within the property, and we needed to take all of it the way in which down the studs and optimize it into a 3 bed room, two and a half bathtub home. We have been going to do a proper en suite upstairs with a walk-in lavatory closet, as a result of all of the comparables that we have been seeing had the larger bedrooms. Properly, let me take a step again. As we pulled the comparables, we have been taking a look at 4 bedrooms, two and a half bathtub homes, however ones with formal en suites after which ones with out en suites.
Those with en suites have been promoting for 10 to fifteen% greater than those with out. For us, as remodelers, we already know we’re going to take the entire thing down the studs anyhow, so it doesn’t make a distinction and value that a lot whether or not we’re doing that or not. We threw away the non-en suite properties as a result of we’re nonetheless doing the identical quantity of labor to get a better comp.

Dave:
Is that simply one thing being in your space that en suite bogs is one thing you need to be contemplating, or out of all the handfuls of variables between homes you could contemplate, how did you determine that en suites have been the distinction maker there?

James:
Properly, there’s at all times your main promoting options. Once we’re taking a look at comps, we’re going by image by image on every home and we’re studying the descriptions. As a result of for those who simply do it shortly, a 4 mattress, three bathtub home gained’t comp for a similar as a 4 mattress, three bathtub home. It must have these facilities. We’re at all times checking for kitchens, en suites, as a result of these are two massive promoting options. After which we’re additionally checking for layouts of bedrooms and baths. The place is the locational? In the event you’re a one bed room upstairs and two within the basement or let’s say three within the basement, that’s a worst resale product.
Households don’t need to have their youngsters downstairs. We’re checking areas of areas as effectively, as a result of these are massive variations. Not each 2,000 sq. foot home is similar. We’re checking all these finite particulars. As a result of as we’re doing our development plan, it makes a giant variance in the fee too if we’re having to maneuver all of the bedrooms, all of the bogs. We’re on the lookout for the best highest and greatest use at the moment.

Dave:
That’s superior. The place did you come out with the ultimate worth there that you might get out of this property?

James:
After we checked out it, by including the 2 bedrooms and a shower and a half and creating the en suite, the worth of that property was going to be 699, or no, 725 on the time. By doing the additional scope of labor, it was growing the worth by over $100,000. The price of that renovation is simply going to value me about 50,000 extra to do this plan. I’m getting 100% upside. However the factor I even have to have a look at after I’m taking a look at comps is how a lot time is that going to be as a result of there’s a price to that debt.
My true value could also be 50 grand to extend the worth at 100,000, however I additionally needed to account for the $20,000 I used to be going to incur in debt value and entire value. That tells us what the best and greatest use is with these technical crops. On the finish of the day, we’re nonetheless getting a 30% margin enhance through the use of the debt and the development to extend the worth.

Dave:
Jamil, would you do something otherwise?

Jamil:
No, I believe that it’s actually attention-grabbing to listen to the actually inventive methods to extend and add worth. One of many more durable issues for me to have ever fought for with respect to an appraisal is how a lot format impacts worth and what James is speaking about with respect to the place the bedrooms are positioned. He’s 100% proper. After all, if you’re speaking a couple of household, households don’t need their kids to be on a special flooring than the place the mother and father are. That’s a really actual factor, proper?

Dave:
Yeah. I’ve a buddy who turned out like a beep up and we at all times make enjoyable of him as a result of he’s the basement child. All his siblings lived upstairs they usually have been all superb. His mother and father caught him within the basement. It’s been downhill ever since.

Jamil:
I imply, look, I used to be a basement child too.

Dave:
Have a look at you! All proper, you proved it improper.

Jamil:
Properly, I imply, for those who have been taking a look at me in my 20s, you’d be like, “That man positive is popping right into a basement child.”

James:
Everybody can get out of the basement sooner or later.

Dave:
You’re a basement to high flooring success story.

Jamil:
It’s attention-grabbing, as a result of I agree, there’s an intangible worth to those nuances, these various things. I’ve simply but to see how that impacts houses or how that has affected an appraisal in a deal that I’ve been concerned in. I don’t know what’s the worth for a greater format and the way a lot are you able to give that property?
What James is doing is he’s wanting image by image and seeing, okay, effectively, when you’ve got the en suite, it’s value 20% extra. I imply, over right here, as a result of we’re so cookie cutter over right here, it’s simply fully completely different. I really like the inventive, I really like the very intricate methods you could… I might say that the way in which that James is comping homes is inventive. The best way that we comp it is extremely formulaic.

James:
The one factor you are able to do as an investor is use your dealer because the sounding board, as a result of an appraiser’s not going to think about that as a lot a whole lot of occasions. They’re not going to think about the mattress or bathtub counts as a lot, or livability and stream. That’s what your dealer’s for. They’re going to let you know, is that this property extra marketable? If it has a greater perfected flooring plan, sometimes you’re going to get 5, 10% extra. That may make a giant distinction if you’re promoting one million greenback home. Use the entire crew if you’re taking a look at comping properties as a result of it will probably make a big impact. However this deal acquired even higher although after we dug into it.

Dave:
What?

James:
Oh, it acquired method higher. That is what pushed me over the sting as a result of it was about taking a look at that highest and greatest use. As soon as I’ve found out I used to be in his vary, we dug down in additional. As a result of after we’re taking a look at these numbers, we ended up shopping for this property for 435,000. We’re placing $135,000 within the development, after which we’re going to promote it for 699 to 725 after we set up our comparables. The margin on that after you flip it and you are taking 9 months and the arduous cash prices, it really finally ends up being like 60, $70,000 in revenue, which it is a lot of labor for that a lot cash. That’s the place I used to be having the hesitation.
Going again to that, Metro cities, you possibly can take a really common deal that may not be definitely worth the effort and maximize it, as a result of the following factor I checked out was the dimensions of lot. The dimensions of lot was a 6,800 sq. foot lot, which is massive for Seattle. Sometimes, they’re 4 to five,000. It was zoned single household. In the event you simply have a look at that very floor degree, you’re going, “You may’t construct something extra there as a result of it’s SF 5000, so one home per 5,000. You’re quick.” However with the density enhance, they’re permitting you to air condominium off cottages. After which in that cottage or the DADU, we will then construct a unit within the again, condominium it off and promote it as a separate property.
However there’s a pair issues it’s important to be careful for if you’re comping these. While you put a construction at the back of the property, my property that was value 725 is now going to go down in worth. My lot measurement is shrinking. It’s extra congested. We’ve to regulate that down. The issues that it’s important to contemplate on these values is the place is your parking. Typically you’re shedding parking by doing this. Parking in Seattle could be a distinction of $100,000 when you’ve got a parking spot due to the quantity of density. After which there’s slightly bit extra crime proper now. It’s important to alter that. We’re planning within the DADU.
After which primarily based on that DADU, we needed to provide you with two new comps. One is how a lot is that property worth coming down. And so then we began on the lookout for comparables with properties with yard cottages as effectively. We have been solely specializing in that, which introduced our price down from 725 to 675, as a result of we have been nonetheless going to have parking and we have been nonetheless going to have a yard. If we wouldn’t have had a yard or parking, it might’ve really been 599. Actually digging in these core attributes. The following factor we needed to do was, what DADU can we construct within the again? Do you construct a two bed room, two bathtub with no storage?
Are you able to get a one automotive storage in? Are you able to get a two automotive? As a result of a DADU within the again after we pull comps, if it had no parking, no yard was value 599. If it had a one automotive storage in a small yard, it was value 800.

Dave:
What?

James:
The swings are that massive.

Dave:
What?

James:
Similar sq. footages, identical designed homes, however the livability issue, as a result of they didn’t really feel like they’re in a yard condominium, they really feel like they’re in a home.

Dave:
In that single household dwelling.

James:
Then I needed to revisit the location and go, what can I match right here? After which from there, we found out we might get a two automotive storage on this property, a two bed room, two and a half bathtub, 1,000 sq. DADU with a yard, that’s value 800 grand. My mixed worth simply went from 725 on the excessive to over… We’re wanting on the DADU’s value greater than the home within the again.

Dave:
I imply, it’s a DADU technically, however you’re simply constructing a second home.

James:
Nevertheless it’s permitted and condoed off as a DADU. That’s essential. As a result of if we have been subdividing, it might take six months to 9 months longer than doing the DADU. On that value, that’s $100,000 in maintain value at that time. Once we’re pulling comps, it’s not nearly discovering like for like, that’s essential, nevertheless it’s the situation. How are we shifting it up and down?
What’s that magical, highest, and greatest equation that may be probably the most quantity of labor, or perhaps it’s as a result of least quantity of labor and get your velocity of cash going? Get out and in, flip it. As a result of at one level, I used to be actually serious about simply doing a two mattress, one bathtub, turning it as a result of my money on money return was really greater than the larger venture.

Dave:
I really like this as a result of a whole lot of occasions, particularly lately when offers have been tough to come back by, we are saying on BiggerPockets and plenty of different actual property educators say you could’t at all times discover offers, it’s important to make them. I believe it is a excellent instance of constructing a deal. Clearly not everybody can do this sort of development, nevertheless it simply proves that pondering creatively and discovering the absolute best use of your property could make one thing nice out of what at first go seems prefer it’s not going to be worthwhile in any respect.

James:
Yeah, and that’s the place the expertise of comping is so essential. I heard for 2 years, you possibly can’t discover offers. There’s no offers. Our favourite offers and probably the most quantity of properties I purchase are ones which can be sitting proper on market publicly marketed on the market which were on marketplace for six months. Folks simply have been taking a look at it a method. My ardour is taking a look at a deal that everybody says is a nasty deal and slicing it up 4 to 5 methods and discovering that magical equation to the place it goes from a dud to a house run.
That’s why for those who’re in these core metro areas, the properties are costly, the values you will get the upside, however it’s important to put that perfective plan collectively, that’s by understanding values after which going, okay, what can I do to maximise this deal, however not overcomplicate the plan?

Dave:
I like it. That’s an ideal option to get out of right here. Thanks each a lot. I’m going to try to flip a home hopefully with you guys. Let’s do it collectively. I believe it might be tremendous enjoyable. We’ll make some content material out of it, however I realized lots. One fast query for you guys. I do know now we have two seconds. Are you able to inform me actually shortly, how do you alter this for those who’re in a market that’s correcting? Are you taking these comps after which adjusting them down within the comping course of, or are you padding your development finances or your margins? How do you alter to just be sure you’re not comping towards a market that may have modified in six to 9 months?

Jamil:
For me, if I’m utilizing comps which can be 90 days previous or newer, I really feel fairly assured that we’ve adjusted for market situation. Sure. Right here’s different thought. I’m seeing the market really enhance, so I don’t really feel like we’re going to be value much less by the point I come to market on my renovation from this level so long as I’m utilizing comps which can be 90 days older or new. After which I’m additionally taking a look at pendings, the place are actives and pendings sitting, as a result of that’s going to inform me the course of the place issues are going as effectively.

James:
Yeah, Jamil nailed it. Current comps or we use comps with comparable rates of interest. We’re going, okay, what’s the charge at? Let’s have a look at what the market was doing at the moment. After which pendings. Pendings are key as a result of that’s the hottest. After which speaking and speaking to these brokers as a result of they’re additionally telling you what number of our bodies are coming by that home. In the event that they’re pending at full worth, however they’d six individuals come by within the weekend, I’m going to really feel good that that market’s going to carry. In the event that they have been on for 45 days they usually had one provide with little or no showings, I’d deliver the worth down slightly bit. It’s about velocity of individuals as effectively.

Dave:
All proper. Properly, we acquired to get out of right here. However thanks guys a lot. This was a whole lot of enjoyable. We went method over as a result of I used to be studying lots, and I hope everybody listening realized lots. Thanks, Jamil and James, and thanks all for listening. We’ll see you subsequent time for On The Market.
On The Market is created by me, Dave Meyer, and Caitlin Bennett. Produced by Caitlin Bennett. Enhancing by Joel Esparza and OnyxMedia. Researched by Pooja Jindal and a giant due to the whole BiggerPockets crew. The content material on the present On The Market are opinions solely. All listeners ought to independently confirm information factors, opinions, and funding methods.