What is Price Per Square Foot?
Price per square foot is a standardized metric that divides a property's price (or value) by its total living area in square feet. It allows quick comparison between properties of different sizes in the same area. If a 2,000 sq ft home sells for $300,000, the price per square foot is $150.
How to use it
Price per square foot is most useful as a quick sanity check. If comparable homes in a neighborhood sell for $120-$140/sq ft and your deal's ARV implies $180/sq ft, something may be off with your analysis. Conversely, if you are buying at $80/sq ft in a $130/sq ft neighborhood, the margin looks promising.
When it works well
Price per square foot is reliable when comparing similar properties in the same neighborhood: same age, same construction quality, similar lot sizes, and similar condition. It works well for subdivisions where homes are relatively homogeneous.
When it misleads
Price per square foot breaks down when comparing: small homes vs large homes (smaller homes often have higher $/sqft because kitchens and bathrooms cost the same regardless of total size), different neighborhoods, different property conditions, homes with significant lot value differences, and renovated vs un-renovated properties. A 1,200 sq ft fully renovated bungalow may sell for $200/sqft while a 3,000 sq ft dated ranch in the same area sells for $120/sqft — both prices can be fair despite the large $/sqft gap.
For wholesalers
Include price per square foot in your marketing packages as one data point among several. Buyers who analyze deals regularly use $/sqft as a quick filter. If your deal's $/sqft is competitive with recent sales, it passes the first screening test. But always support it with actual comparable sales data rather than relying on $/sqft alone.