ARV
Investor · Minneapolis, MN · Member since 2015 · 21 posts · 1 vote
ARV
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Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votesThat is a widely used formula for determining your max offer, but it really has nothing to do with determining ARV.
The After Repair Value (ARV) is the estimated full retail price of the property after it is repaired and in "tip top" condition and ready for sale, and you would need to plug that number into the formula above.
For example, if you determine a property would retail for $100k, you could use that as your ARV. If the property needs $20k in repairs and you want to make a $2k assignment fee, your formula would be:
1. $100k (ARV) times 70% = $70k
2. $70k minus $20k (repairs) minus $2k (assignment fee) = $48k
Thus, you might use $48k as your max offer for the property*.
(*Even this varies a lot from market to market, and you may find with a lot of competition from other investors, you'd be wasting your time making offers at this level...or overpaying if your market is depressed...bottom line, get to know your market.)
ARV can be tricky to determine, especially without access to the MLS - and I'd be very cautious about using zestimates, property appraiser estimates, or other mass appraisal tools, because these can vary wildly. Also note that you can't use list prices, you need to look at actual sold prices - usually within the last six months, within as narrow a radius as possible to the property you're trying to value, on very similar properties - in other words, Comparable Sales, or "Comps".
I recommend getting your hands on some old appraisals from a professional appraiser, so you can see the process they use to determine market value.
I also recommend making friends with a realtor who will "run comps" for you occasionally. Also beware that some realtors are in the habit of just looking at an automated CMA (comparative market analysis) that spits out a number - these too can be way off, especially now that the market is heating up in many areas.
Bottom line, learn your market, and learn how to evaluate comps yourself, then you have no one else to blame if you under or over price a property.
One final note - you don't actually have to buy properties in your market to evaluate and monitor their list price, days on market, and sale price - pick several representative properties in your area to monitor and evaluate as test cases so you can learn by doing, but without risking any money or wasting anyone's time.
Copeland Morgan LLC4.770 Reviews
5 Replies
- 11yJeff CopelandBusiness MemberReal Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
That is a widely used formula for determining your max offer, but it really has nothing to do with determining ARV.
The After Repair Value (ARV) is the estimated full retail price of the property after it is repaired and in "tip top" condition and ready for sale, and you would need to plug that number into the formula above.
For example, if you determine a property would retail for $100k, you could use that as your ARV. If the property needs $20k in repairs and you want to make a $2k assignment fee, your formula would be:
1. $100k (ARV) times 70% = $70k
2. $70k minus $20k (repairs) minus $2k (assignment fee) = $48k
Thus, you might use $48k as your max offer for the property*.
(*Even this varies a lot from market to market, and you may find with a lot of competition from other investors, you'd be wasting your time making offers at this level...or overpaying if your market is depressed...bottom line, get to know your market.)
ARV can be tricky to determine, especially without access to the MLS - and I'd be very cautious about using zestimates, property appraiser estimates, or other mass appraisal tools, because these can vary wildly. Also note that you can't use list prices, you need to look at actual sold prices - usually within the last six months, within as narrow a radius as possible to the property you're trying to value, on very similar properties - in other words, Comparable Sales, or "Comps".
I recommend getting your hands on some old appraisals from a professional appraiser, so you can see the process they use to determine market value.
I also recommend making friends with a realtor who will "run comps" for you occasionally. Also beware that some realtors are in the habit of just looking at an automated CMA (comparative market analysis) that spits out a number - these too can be way off, especially now that the market is heating up in many areas.
Bottom line, learn your market, and learn how to evaluate comps yourself, then you have no one else to blame if you under or over price a property.
One final note - you don't actually have to buy properties in your market to evaluate and monitor their list price, days on market, and sale price - pick several representative properties in your area to monitor and evaluate as test cases so you can learn by doing, but without risking any money or wasting anyone's time.
Copeland Morgan LLC4.770 Reviews - Investor · Minneapolis, MN · Member since 2015 · 21 posts · 1 vote11y
I see thanx for the advice
- Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes11y
Originally posted by @Vidal LeClaire:
is this the best way to find ARV...
70%ARV - repairs - wholesale fee = max offer
????
I think you meant the best way to determine what to offer the seller as a wholesaler? To find the ARV of a property, its not about a formula but rather using reliable and verifiable sales comps in the area to ascertain the value.
- Real Estate Investor · Odessa, FL · Member since 2015 · 66 posts · 15 votes11y
I believe that there is a real nice spreadsheet out there that calculates all that in Excel. You input beds/baths/square feet and all repairs..It then tells you the maximum that you should pay for the project and calculates your profit..
- Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes11y
Originally posted by @Tom Kelly:
I believe that there is a real nice spreadsheet out there that calculates all that in Excel. You input beds/baths/square feet and all repairs..It then tells you the maximum that you should pay for the project and calculates your profit..
If the reference is to what an investor should pay for any property, you just don't want to pay whatever some spreadsheet suggest without being aware of the logic behind the formula. You have to be sure that whatever formula is used to suggest what to pay, actually aligns with what works for you or construct what fits your specific circumstance. The 70% rule usually is a good start for most starters.
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