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If you are looking online for the best house flipping software or the best real estate investment app, you may be wondering how to choose from the many software providers that are available. Many real estate investment apps claim to offer similar features, but looking more closely under the hood, some offer superior real estate analysis and property due diligence tools, and others only offer the bare minimum, or worse yet, completely misrepresent their offerings.

To evaluate whether the real estate investment software that you are looking at generates the most accurate real estate investment analysis, you have to first understand a number of characteristics of what makes up the best real estate investment software.

In this post I define the eight key characteristics that separate poor software from the best software, so that you can make an educated decision.

 

Coming up with an accurate after repair value (ARV)

When the time comes to sell your rehabbed property, it is an appraiser that will determine the value for the buyer’s lender. For that reason, it is important that the software you choose to evaluate a potential deal uses standard appraisal techniques to help you come up with an after repair value.

 

Poor quality house flipping software

Poor quality software will either take an automated valuation from a web site as gospel, or worse yet, take automated valuations from 3 different sources, average them out, and give you a number. This is problematic in a number of ways.

First, automated valuations, while always getting better due to ever improving machine-learning models, are still notoriously error prone and inaccurate.

Second, taking an average of 3 inaccurate numbers gives you an even more inaccurate number, essentially just giving you the average of 3 guesses. Even if one of the guesses was correct, the average will still point away from the correct number.

Any accuracy that you will get using this method is going to be by luck, which is not a great investment methodology.

 

Better house flipping software

Better software gives you comps that you can select from, using the appropriate criteria. The criteria that you should use to select comps include comps that are at least:

  1. Recent
  2. In the same neighborhood
  3. Within 10-20% of each other in terms of size
  4. Similar in terms of bedrooms, bathrooms, and other features

 

Best house flipping software

The best software goes one step further beyond just finding comps, and gives you the ability to perform a sales comparison analysis. A sales comparison analysis is the technique that appraisers use to analyze comps. With this technique, not only do you select appropriate comps using the selection criteria above, but you also adjust for the market value of the major differences between your properties.

Most realtors won’t perform this step for you when they give you comps, yet this could mean a difference of thousands to hundreds of thousands of dollars in the final value of your property.

 

Where the software providers get their comps data

There are really only 2 places to get property data: from public record, and from the local MLS. Public record data can be found by going directly to the public record databases, whether they are online or offline, or by using third party data providers that aggregate this data either in a limited area or nationwide. These are data providers such as PropertyRadar (limited area), ListSource, and even Zillow.

MLS data is only available to licensed real estate professionals under very strict rules of access reserved for the purchase and sale of real estate.

 

Poor quality house flipping software

The worst kind of software is one where they tell you that they get MLS data from Zillow, as such a thing does not exist. If they are lying to you about that, then they are likely lying to you about everything else.

This is worse in my opinion than software that does not provide you with any comps at all.

Other poor software will just use the automated valuation of one of these services.

 

Better house flipping software

Better software includes software that provides you suggestions of comps from the public record. Most will use Zillow for this as Zillow provides an easy to use interface to the public record data.

 

Best house flipping software

The best software allows you to use MLS data in your analysis. Because of the difficulty in getting this data, this software is typically much more expensive. A good alternative is software that allows you to import free MLS data for your comps analysis.

You can learn how to get free MLS comps here:

How to Import MLS Comps from Redfin into REIkit.com Real Estate Investment Software

 

Repair cost estimation

Property rehab estimation tools are often found within house flipping software, with varying abilities. The software you choose should allow you to estimate repair costs in a variety of ways, get construction costs from a reliable source, and give you enough costs to select from to get as precise an estimate as possible.

 

Poor quality house flipping software

Inadequate software, from a rehab construction costs standpoint, is one where they have not included any of the features mentioned above.

Many rehab estimation spreadsheets are just that, static spreadsheets with no data in them, only cells for you to enter your own costs that you found elsewhere. This is usually the case in what are called rehab estimation calculators.

 

Better house flipping software

The next step up from that is a rehab estimation spreadsheet with pre-filled construction costs. Those are usually static costs that are not updated once you download the spreadsheet, unless you purchase the spreadsheet again. If that spreadsheet only has costs for where that spreadsheet provider is located, or if the costs are not indexed – that is, costs for precisely where the property is located – the results will not be accurate.

 

Best house flipping software

The best software will allow you to enter your rehab costs in a variety of ways (including the ways mentioned above), at different levels of granularity:

Rough number

If you are performing an initial analysis to see if the property is even worth visiting, you might have a number based on dollars per square foot. The software should let you enter one single number for rehab costs just to see if a deal has enough spread.

Broken down by system

When you first visit a property, you will generally perform a rough estimate of the major systems using a punch list. You would want to do this before you spend any serious time performing a detailed construction cost estimate to get a rough idea of the deal economics.

Here’s the rehab estimation punch list that we use while performing an initial walkthrough of a potential house flip:

Rehab Walkthrough Estimation Checklist

Itemized construction cost estimate

After you have entered your initial estimate and the deal appears to still make sense, at this point the software should also allow you to create an itemized rehab cost estimate using a nationwide list of labor and material costs.

 

Allows you to model multiple exit strategies

What works for you now might not work for all investments, or future investments. The best software provides flexibility in determining your exit strategies, allowing you to model what a real estate investment property would return on your investment as a fix and flip, buy and hold, BRRRR, or wholesale, all in one interface.

 

Limited quality house flipping software

Will focus on only one exit strategy.

 

Better house flipping software

Will support multiple exit strategies, but the analysis will be limited.

 

Best house flipping software

Will be flexible to support any number of strategies by supporting the itemized analysis of income, expenses, purchase, sale, and repair costs, financing and JVs.

 

Has the flexibility to apply multiple “what if” scenarios

When real estate investors do an analysis on a property, much of it is simply adjusting the numbers to find the combination with the best financial outcome. The best software will have the flexibility to break those numbers down into an itemized list, or override them with one single number.

 

Poor quality house flipping software

Probably only lets you enter a number as an input to your analysis.

 

Better house flipping software

Allows you to itemize your analysis inputs.

 

Best house flipping software

Allows you to either itemize your inputs, or override them with a general number.

For example, in a multi-family rental analysis scenario, the best software would let you to itemize income and expenses or override those inputs.

In the case of income, it would allow you to enter a flat rental amount for the entire property, or override that with an amount for each individual unit.

Similarly, for rehab improvement costs, it allows you to itemize down to the material level, or override costs with a single number. This enables you to see how the overall financial picture changes for each scenario.

 

Allows for complex financing scenarios

The house flipping software you choose should allow you to model complex financial scenarios, not just basics such as down payment, rate, and term. These complex scenarios may include multiple loans, at different rates and holding periods, with a potential of profit sharing on the back end.

 

Poor quality house flipping software

Lets you add a number for financing.

 

Better house flipping software

Might let you add some loan characteristics such as rate and down payment.

 

Best house flipping software

Your software should allow you to determine the best financing method for a property, by modeling different scenarios such as the following:

Loan 1: 65% purchase price hard money purchase loan at 10% and 2 points, with $500 fees

Loan 2: 100% hard money construction costs at 10% and 2 points and no fees

Loan 3: $100,000 private money at 7% and 25% profit split on the back end

Loan 4: 75% conventional refinance after 6-month seasoning period

 

Includes metrics and reporting for different investment exit strategies

Each investment exit strategy has a set of metrics that the best software should be able to calculate, and also provide detailed reports to share with lenders, partners, and buyers.

For house flipping, the most important metrics are profit, how much money is required out of pocket, what the return on investment (ROI) is, what the rate of return (ROR) is, and in some scenarios, the JV split.

For rental scenarios, the most important metrics are not only cash flow and cash on cash return (COC), but also the gross rent multiplier (GRM), the operating expense ratio, and the internal rate of return (IRR).

 

Poor quality house flipping software

Only has one limited report for one specific exit strategy with limited information inside.

 

Better house flipping software

May have multiple reports for different exit strategies and should contain the most important metrics for those strategies.

 

Best house flipping software

Should have multiple reports, with metrics specific to each strategy. Additionally, the reports should be configurable so that you control the data that is shared.

 

You get what you pay for

Building good quality software with good data is very expensive, so when you see free, or low cost software, there’s very likely a reason for this: their claims are probably exaggerated, and it has neither good data, nor the features that you need to help you perform the tasks at hand.

So when you see free, or low cost software that claims to have the same features and benefits as software 10X the price, the simplest explanation is that it is only actually offering you 1/10th of the features, or that there are hidden fees.

Here are some expectations of software at different price levels:

 

$1-10/mo

You will typically just get a calculator, or any of the limited software qualities. When you pay very low amounts for software, it is being used to make it easy for you to be constantly upsold by the company for a much more expensive product or course.

TIP: This is not to be confused with the standard practice of free trials where you enter your credit card up front. Free trials are a great way to help you evaluate well-priced software where there’s no expectation for upsell to an expensive course.

You should generally avoid software that costs $1-$10.

 

$10-$30/mo

You might get some but not all of the features under the better software category.

This software is good for beginners who are not sure yet if real estate investing is for them.

 

$30-$75/mo

The software is likely very good in respect to one or more features, and sometimes an up and coming company that is trying to get a foothold in the market. This software is often underpriced, and there is opportunity for early subscriber customers to get much more value in return for their money.

This software is good for beginner to intermediate investors who have committed to building their business, but may not have all of their systems in place, or enough money to spend on expensive software.

 

$75+/mo

The software has solved a particular pain point very well, or is likely an established leader in their market, so they can command a premium.

 

Summary

In this post, I defined several key dimensions that the best house flipping software should have, to arm you with enough information to help you choose software with features and pricing that works for you. Sometimes it’s not as simple as relying on claims, and depending on your budget, might require compromise between price and features.

You really do get what you pay for, so if you have an extremely limited budget, in my opinion you will be better off by not buying any software at all so as to avoid exaggerated claims, and constant upsells.

REIkit.com was created to overcome the poor quality of the real estate investment software on the market today, and a free trial is available for you to test out all of the features and see if it’s right for you.

Start your risk free trial here (with no upsells):  REIkit.com House Flipping Software Free Trial ->

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