Determining ARV: Am I doing it correctly? [Pictures and pdf Comps inside]
I am new to wholesaling, and would like to take this one step at a time educating myself and taking my time long before trying to put my first property under contract. First is making sure I have a solid understanding of determining ARV. To practice I am looking at HUDs at HUD home store, and pulling comps on them just to practice finding ARV. Let me make it clear, these are NOT properties I have under contract and I have not actually physically looked at the property, the estimated repair number is just a number off the top of my head. This is again just a practice in determining ARV.
ARV and Estimating repairs are where many wholesalers, making overly aggressive comp pulls for ARV or underestimating repair costs and assigning a huge wholesalers fee. Thus making dud deals with not enough spread in them. The point of this post is to take it one key component at a time and focus on it, in this case ARV.
Criteria for pulling comps
- within +/- 20% sq ft of subject property
- within +/- 10 years for year built
- same or similar number of bed/bath/garage
-Attempt to get comps with same exterior and construction as subject property
-For an actual wholesale deal subject property needs to be $0.70 cents on the dollar minus repairs, or there is not enough spread for the end investor. Thats with an accurate estimate of bot ARV and repairs.
That being said, my hypothetical subject property here is Lotus. First I will show the full list of solds from the study area and show you which ones I selected. Also please view the property overview PDF I put together for this it contains an actual report as I would send to investors. Here is a link to the PDF:
http://dl.dropbox.com/u/59442741/property_overview_lotus.pdf
The above is the Full list of sold comps within subject property study area. From this list I filtered out "as is" or "HUD/REO" sales. In addition, I further filtered by subdivision, keeping comps in the same subdivision as subject property. Since there were enough comps I was able to get all comps from the same subdivision as subject property.
Once I have the sold comps I do a CMA that gives me the median $ / sq ft. I take this value and multiply it by the sq ft of the subject property. For instance if the median $ / sq ft for the sold comps is $62.20 and my subject property is 1,500 sq ft.
$62.20 x 1,500 sq ft = ARV of $93,000
Sorry for a somewhat longwinded post. Thank you for taking the time to view and or reply to my message, I truly appreciate it.