What is your method to determine ARV for your flips?

6 Replies

So newbie here and trying to learn all I can. I've been trying to analyze some deals, but getting caught up trying to determine an accurate ARV.

I've been working on a spreadsheet I modified to do CMAs. My first problem is determine the number to use for adjustments (Age, Lot size, BRs, patio, etc). I understand no one can tell me these numbers for my market, but what did you use to learn some rough numbers for your first couple of flips? Or do you even do this type of CMA in the first place? Is this something I should be relying on my agent for?

Also, any tips for determining condition and level of finish for sold comps when there are no longer pictures posted or relevant details in the listing?

Thanks for any advice you can offer!

Promotion
Ashcroft Capital
A national multifamily investment firm
Three Reasons Investors May Prefer Real Estate
Read three reasons why investing in real estate private placements may provide several advantages.
Read More Here

@Sean Youngberg seems like you are trying to get a hard number. Comps are usually rough and approximate numbers to guide you. The best thing to do is to reach out to Realtor and have them do this for you. Most Local MLS sites provide you with an option to do it yourself.

Here is what I suggest if you are in a dense and populated area where houses are close to each other. Use the price per square foot method.

  1. choose a few comps surrounding your subject property(about 3-5 houses) recently sold for ARV/Retail value.
  2. Match- the year build(give or take 5 years), Sqft.(give or take 200sqft), beds, baths, garages, pool, condition of the house sold
  3. calculate what the houses sold for and find out what the price per sq.ft. was (price sold divided by sqft= price per sq. ft.)
  4. Take the average of each Price Per Sqft. and average it out
  5. multiple the average price per sqft. times your subject property and that is your ARV

Example:

Subject Property: 3/2 1,500sqft. built 1972

Comp 1:  3/2 1,300sqft. built 1975 sold $145,000 price per sqft $112

Comp 2: 3/2 1,700sqft. built 1972 sold $155,000 price per sqft $91

Comp 3: 3/2 1,450 sqft. built 1977 sold $135,000 price per sqft $93

$112 + $91 + $93 / 3 = $99

$99 X 1,500 sqft. = $148,500

A.R.V. = $148, 5000

Hello Sean I see your attemping to evaluate the propteries using the CMA method. zthat method is modtly used to revaluate an apprasal to see if the adjustmrnts support the appraisors value. My opinion has always been the apprasors value is only good for the of there inspection. I feel more comfortable considering the replacement. If I can buy lower the construction then its a good desl. This my opinion, hopes is shead some light.

Don Enrique

Originally posted by @Manny Cirino :

@Sean Youngberg seems like you are trying to get a hard number. Comps are usually rough and approximate numbers to guide you. The best thing to do is to reach out to Realtor and have them do this for you. Most Local MLS sites provide you with an option to do it yourself.

Here is what I suggest if you are in a dense and populated area where houses are close to each other. Use the price per square foot method.

  1. choose a few comps surrounding your subject property(about 3-5 houses) recently sold for ARV/Retail value.
  2. Match- the year build(give or take 5 years), Sqft.(give or take 200sqft), beds, baths, garages, pool, condition of the house sold
  3. calculate what the houses sold for and find out what the price per sq.ft. was (price sold divided by sqft= price per sq. ft.)
  4. Take the average of each Price Per Sqft. and average it out
  5. multiple the average price per sqft. times your subject property and that is your ARV

Example:

Subject Property: 3/2 1,500sqft. built 1972

Comp 1:  3/2 1,300sqft. built 1975 sold $145,000 price per sqft $112

Comp 2: 3/2 1,700sqft. built 1972 sold $155,000 price per sqft $91

Comp 3: 3/2 1,450 sqft. built 1977 sold $135,000 price per sqft $93

$112 + $91 + $93 / 3 = $99

$99 X 1,500 sqft. = $148,500

A.R.V. = $148, 5000

@Manny Cirino

Awesome. Thanks for the advice. This seems like an accurate enough method to get a good baseline ARV without spending too much time. I was actually trying to do something similar with a spreadsheet that made adjustments to the comps and then come up with an adjusted $/SqFt for the comps and then take the average of that and apply to the subject property. But where I can find comps that are more similar, your way would be much simpler. Plus I haven't had enough experience to know what kind of value to use for the adjustments.

My main issue with my spreadsheet is how to compare finished basement sq ft. And it would be the same problem with your method. For the listings I'm looking at on Zillow, etc. they seem to include the basement space in the total sq. ft. amount and the sold $/sq. ft. value. Have you ran across this before? Is that something specific to my market? I thought I had read that finished sub-grade living spaces should not be included in the total sq. ft. of the property.

It has been a pain where I'm trying to compare a subject property without basement with others that have 500-800 sq. ft. basement.

@Sean Youngberg This method is pretty effective as long as there are a lot recent sales with the same property descriptions. Basements do not exist in Florida(at least not where I am at) so it is not a problem I come across at all.

I would imagine anything with a basement would definitely be a plus. I often use this method for every deal I look at. But if there are factors I am not sure about I will take a look at the AVM on

http://express.realquest.com/propertyvalue.aspx

search property values, put in the address and it will give you a value the value it provides is the Medium value it provides a number under it which is the percentage the property can be valued above or below that medium price.

example

on the top left hand corner of the results page you will see

Estimated Value: $100,000

Forecast STD Deviation: 10 

The 10 = 10%

your range would look as follows after you do the math

Low= $90,000

Medium= $100,000

High= $110,000