How Do I Figure Out The ARV Of A House?
By Daniil Kleyman:
Determining the After Repair Value (ARV) of a house is an essential step in assessing the potential profitability of a real estate investment. It’s absolutely crucial to being able to calculate the right offer to make to a seller. Here's a guide on how to figure out the ARV:
- Start with the end in mind: If this is a house that will undergo a rehab, determine what the finished product will approximately look like: sq ft, beds, baths, add ons such as garage, pool and the types of finishes.
- Research comparable sales: Start by researching recent sales of similar properties in the same neighborhood or nearby. “Similar” means similar to the finished product. Look for properties that are comparable in terms of size, condition, features, and location.
- Analyze property features: Evaluate the key features of the house you're assessing. Consider factors such as the number of bedrooms and bathrooms, square footage, lot size, amenities, and any unique characteristics. Compare these features with the comparable properties you researched in step 1.
- Adjust for differences: Once you have identified comparable properties, you may need to make adjustments to account for differences between those properties and the subject property. For example, if the subject property has one less bedroom compared to a comparable property that sold for a certain price, you may adjust the value downward to reflect that difference.
- Consider market conditions: Assess the current real estate market conditions in the area. Determine whether it is a seller's market (high demand, low supply) or a buyer's market (low demand, high supply). Market conditions can influence property values and should be taken into account when estimating the ARV.
- Consult real estate professionals: Seek advice from real estate agents, appraisers, or experienced investors who are familiar with the local market. They can provide valuable insights and assist you in determining an accurate ARV based on their expertise and knowledge of the area.
- Utilize online tools: There are online platforms and tools available that can help you estimate the ARV of a property. These tools often use algorithms and data from recent sales to provide an estimate. One such tool is Rehab Valuator Premium. This software instantly gives you the 25 most relevant comparable sales to your property along with an ARV estimate. You can then filter down your comparable sales based on easy to adjust criteria and adjust your ARV for maximum accuracy. Demo Here
- Calculate the ARV: After collecting all the necessary information, calculate the ARV by taking into account the comparable sales, adjustments, market conditions, and expert opinions. The ARV is an estimate of what the property will be worth after the repairs or renovations are completed.
It's important to note that estimating the ARV is not an exact science, and there can be uncertainties and fluctuations in the real estate market. Conducting thorough research, analyzing comparable sales, and seeking professional guidance will help you arrive at a more accurate ARV.
If you are looking to massively shortcut this process, check out the Deal Analysis features in Rehab Valuator. You can easily research each lead, pull up info on the who the owner is, their mailing address and all the vital characteristics of the property (beds, baths, sq ft, zoning, condition). You can also see last sales info and mortgage info. Additionally you can easily pull up and filter comparable sales, calculate ARV, calculate repair costs and determine the right offer. But, that just scratches the surface!
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