How to use BP calculators/ estimate ARV for a buy and hold?

Question

Hi BP!

I'm trying to use the rental property calculator on BP to analyze a few buy and hold properties I'm looking at. I'm confused on the ARV section, since I wouldn't be planning to sell anytime soon after buying. Some of the properties I'm analyzing need light cosmetic repairs and some are in rentable condition with no work needed. Either way, I'm confused on this section of the calculators. If I buy the property at fair market value and put between $1-3k into it for things like a new appliance, new carpet, fans, etc., this is not going to make the value skyrocket right away. Any insight is appreciated :)

Thanks in advance!

Christopher Throop · Answer

@Stephen Franco Which calculator are you using on mortgagecalculator.org that allows you to input your payment amount etc. and get back the property value?  I looked around but couldn't find it.

Marissa Mallamo · Answer

Yes @Brandon Turner that helps! Thank you!

Brandon Turner · Answer

Hey @Marissa Mallamo - Good question :)

So, the ARV is not really used in the calculation, but can be useful for estimating the future appreciation potential. If you are buying the property at full value, just put in the purchase price there. But, lets say, you bought the property for $200,000 and put in $30,000 worth of work before it was rent-ready. And after that work was put in, it was no worth $300,000.  I would put in $300,000 into the ARV field, as appreciation will be based on that number. (So, if prices climb up 10%, then the value would be $330,000.)

Does that help? Let me know!

Stephen Franco · Answer

I do it on my phone with the mortgage calculator app, the last time I use mortgagecalculator.org it was there, let me take a look and see what I find

Now that look, I think what I may have done before if I may have captain jesting the purchase price till it matched the payment match what I had available. And that's why I started using my app

Stephen Franco · Answer

I do my math slightly differently

income

-1/3 for maintenance/vacancy/management expense

-hard costs

-desired monthly FREE PROFIT (say $100/mo each door)

balance tells me the mortgage payment I can afford

that, in mortgagecalculator.org at 6.5 for 20 years, is the value of the house.

If you have to (in some markets) sacrifice mainenance/vacancy pads (as Dean Graziosi and others teach), I guess...but there's a risk.

I love my market in PA. 15% returns AFTER all that. and usually mortgage pays me all my money back.