Rethinking ARV: Creative Approaches to Finding Deals in Today's Market

New to Real Estate · Los Angeles, CA · Member since 2023 · 67 posts · 44 votes

Has anyone here successfully adjusted their strategy to focus on finding deals that don’t follow the traditional ARV formula? and the entire conventional wisdom of the 70% are there any people who don't really use it all and have found out their ways of making the numbers work Like adjusting the percentage based on the market. Curious to hear any creative approaches that have worked in today's market.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @David Martoyan:

Has anyone here successfully adjusted their strategy to focus on finding deals that don’t follow the traditional ARV formula? and the entire conventional wisdom of the 70% are there any people who don't really use it all and have found out their ways of making the numbers work Like adjusting the percentage based on the market. Curious to hear any creative approaches that have worked in today's market.

ARV and future value are speculative so when I am looking at property I am looking at it for longer term - does it fit within my strategy based on conservative estimates. So if I am looking at an asset as a 10 year play - I look more at the location, schools and how has this market performed in the past excluding covid and 2008 which were extenuating circumstances.
Reality is right now shorter term plays do not work based on numbers and cost of financing - we went through this same thing in 2001-2004ish timeframe where properties would appreciate 2-3% per year and after buying costs and closing costs - you were not making money on assets unless you performed the labor or found a really good deal.
this is how real estate "typically" is - which is why everyone always says location location location - because after a decent holding period, you will win.
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David Martoyan
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New to Real Estate · Los Angeles, CA · Member since 2023 · 67 posts · 44 votes
1y
@Chris Seveney
Hey Chris,
Thanks for sharing your perspective, it’s a smart, long-term approach. Focusing on conservative estimates and fundamentals like location, schools, and market performance aligns with the way real estate has historically worked. I agree, shorter-term plays are tough in the current environment, and patience paired with a strong strategy often leads to success, unfortunately this is a strategy that a lot of real estate investors don’t really have the experience and the patience to follow. Love the wise and the straightforward approach!

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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
1y
There are many, they need to be market specific.. For example, this can be adding square footage, adding an extra unit, or adding a pool in a STR market/luxury market. This does not mean you add something that is a luxury in a market that it does not fit. You need to really know what is selling, why it is selling and what to do with that house/townhome/condo. That is why I believe IMO that opendoor (old zillow flipping homes model) does not work. They buy properties, do not know the area put substandard upgrades in the property then sell them for market value or try to and the property sits for a long time. These deals end up sitting for a long time and they lose on it or breakeven. Yes, there are times they do win and make money, but not on a frequent bases in my experience.
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David Martoyan
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New to Real Estate · Los Angeles, CA · Member since 2023 · 67 posts · 44 votes
1y
Quote from @Peter Mckernan:

There are many, they need to be market specific.. For example, this can be adding square footage, adding an extra unit, or adding a pool in a STR market/luxury market. This does not mean you add something that is a luxury in a market that it does not fit. You need to really know what is selling, why it is selling and what to do with that house/townhome/condo. That is why I believe IMO that opendoor (old zillow flipping homes model) does not work. They buy properties, do not know the area put substandard upgrades in the property then sell them for market value or try to and the property sits for a long time. These deals end up sitting for a long time and they lose on it or breakeven. Yes, there are times they do win and make money, but not on a frequent bases in my experience.

Hey Peter, thanks for the comment and the insight and you are absolutely correct about knowing what sells in your market, I see this happen with a lot of fix and flip projects that are just in the wrong areas, the investor gets the house for a good price however spends too much on repairs and adds a lot of luxury thinking that it will push the ARV significantly higher than the average in the area. This is exactly why you have to know what sells, Great point!
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