Forecast ARV on BRRRR

[Matthew Lahickey]

Hello All,

I am looking to find my first BRRRR property and will be using Hard Money. I am trying to determine my current buy price based on my ARV. I'm a newbie and need some clarification: is the ARV calculated with actual expenses from prior 12 months or is it a predetermined formula such as the 50/50 that underwriter's use?

I may be overthinking this but I believe the 50/50 is just a quick generalization and the actuals will be more consistent with the ARV. I am actively searching deals and I am finding many properties have understated expenses. At most I have seen 30% in a C multifamily market in CT.

I understand the cap rate and the NOI determine the ARV, however, I am learning it's easy to manipulate numbers to make a property appear to be a better deal. Can someone please clarify the ARV and if I should base my ARV off 50/50 or actuals listed on MLS.

Thanks,

Matt.