Best Ways To figure out ARV

7 Replies

Hello, just wondering what tools people use to dictate the After Repair Value of there properties. Thinking of getting into the BRRRR strategy.

Any advice or links to other forums would be greatly appreciated. Thank you!!

I am a newbie but the plan is to check properties on Redfin in the same area as the house you are evaluating. Try to get similar houses(beds,baths,pools,etc). You already know how to do this pretty much because it is like comparing any products. When you look at items online you may check one sites price and compare it to the others and see if they are selling the same product. Perhaps you want to buy the video game call of duty so you go to amazon and it is $60 but you check walmart and see it is $80 dollars but you get a limited edition figurine(whatever) with that $80. You have to see "hmm is that extra figurine worth the $20" to come up with where you should buy the game from

Same thing with real estate except instead replace "where should I buy" with "which house should I use as a comp or how much would the property be without that extra bedroom?"

There is no magic tool to calculate the ARV other than getting like-kind comps from any of the online services (realtor.com, zillow.com, etc). Then bump your property up against other houses that are similar to it and that have sold within the last 6 months.

I personally like zillow because its easy for me to enter the address of my house and then set the filters I like to use and see sold homes close to it - how much they sold for and when.

Here is typically how I filter my results:

1) Enter the address of the property
2) Set the square footage filters to +/- 150 to 250 square foot.
So if its a 1,300 sq ft home, set it to 1100 to 1450.  If 2,000 sq ft home, I might set it to 1750 to 2250. 
I would probably say to go 20% under to 10 or 15% over in square footage range based on your subject property.

3) Return houses sold within last 6 mos. 

4) Set the age range of the homes based on the age of the subject property. The newer the house, the shorter the range. i.e.
If house is built in 1940 I might set the range from 1900 to 1965.  
If built in 1970, I might set the range from 1920 to 1990.
If built in 1990, 1960 to 2005
If 2005, 1990 to 2010.

And then search. Then look at the houses closes to your subject property and try to find houses that have the same number of levels. i.e. Ranch vs two story.   Don't worry as much about bedrooms or bathrooms. Those don't typically dictate whether the house is a comp or not. Moreso they just get adjustments.

So a 4/2, 2,000 sq ft house will still have a 3/2, 2,000 sq ft house as a comp. Just a matter of whether they give you an adjustment for having the additional bedroom. In the real world, 4 bedrooms sells for more than 3 (typically).  But I've had several appraisals over the years where the appraiser says they don't adjust for bedroom count.

Bathroom count they would. So a 3/2, 2,000 sq ft house would get an adjustment if the closest comp they could find was a 3/1.5 bath, 2,000 sq ft house. But half baths aren't work a whole lot (3k?).  Basement unfinished is worth 7 to 10k depending on size. Basement finished maybe 10k to 15k depending on bedrooms or bathrooms in the basement. Fireplace worth about 2k to 3k. Deck/patio about the same.

Hey @Mike H. Thanks for the prompt reply. This is some great info! Im analyzing  couple properties right now for fun and I will certainly use these tactics. 

As mentioned, a couple things are for sure:

- There ISN'T a magic equation for calculating an ARV... this is mainly dictated by your local market. For instance, the adjustment value of a bedroom/bathroom scheme in one market isn't the same as another. This is where you have to mainly learn your market

- It's the most wise to use SOLD properties as opposed to LISTED properties. However, I, myself, typically look at listed properties to get an accurate understanding of how long a property has been on the market before it sold at a particular price. You could have a comp that sold for $200k and a comp that has sold for $150k, with the latter being sold in 2-3 weeks, and the preceding being on the market for 6 months (overpriced??)

- Best individuals I have found to get an understanding of the adjustment prices could be other investors at your local REIA meet up, fellow real estate agent, appraiser, etc. The market is ever-changing and so, although to me, it seems the adjusting numbers don't fluctuate dramatically, they could change with passing time.

Just a few pieces of input I wanted to put out there.

Good luck in your ventures.

Hey @Roman Stefaniw  

I just released a bigger pockets blog post on that very subject:

https://www.biggerpockets.com/blogs/8814/68395-how-to-find-real-estate-comps-and-calculate-after-repair-value

One of the most important aspects of that analysis that I always harp on is not to focus on distance from the subject property, rather on neighborhood boundaries.  Most of the time those boundaries are clear, arterial roads, train tracks, waterways, but sometimes not as clear, especially when it's school zones that determine those.  In my farm area, the difference in value between homes in different school zones but on the same street is in hundreds of thousands of dollars.

@Kuba F Fantastic blog post man, really informative and will really come into use! 

Much appreciated!

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