Calculating After Repair Value is Critical
Calculating After Repair Value (ARV) is an important part of the real estate investing equation. The basics of figuring ARV allows you to understand what a house will bring from buyers or investors after the rehab process.
One starting point is to get a Brokers Price Opinion on the property. You can get this either from the area MLS or from a broker partner. A BPO is an estimate of the home’s future value. The opinion gives you an assessment of similar homes in a similar location.
Once you have comparable properties, you can really dig into making an accurate ARV by researching the other homes and taking some of the following steps:
-Does the neighborhood look comparable to your property neighborhood?
Put yourself in your future buyers shoes.
-Does your property’s neighborhood look trashy compared to others?
-Does the other property have the same number of bedrooms and bathrooms as yours?
-Does your property have the same amenities; garage, finished basement, or a fenced in backyard, etc.?
-When was the comparable built compared to your subject property?
-Is your subject property an older style home? Have all the other properties in the area been upgraded on the outside? Are you behind the times?
-Can you make your subject property look like the comparables you are using? How much work and investment will that take?