Calculating ARV for a flip

[Katie Cool]

When figuring the ARV for a flip, I'm curious how others get there. I have been going off the average cost per sf of sold, updated houses, within a mile, with similar sf, baths, br and lot size, and sold within the past 3 mos. I do not consider REO's and SS since they are always lower. Then I multiply the average $/sf by the sf of the house I'm considering to get the ARV.

I know of other investors who also take the average $/sf of pending sales and active sales into account.

How do YOU figure out your ARV? Thanks.

[Jessica Beganski]

Katie,

I only use avg cost/sf as a back-up method if I don't have good comps.

I use comparables as my primary method - 3 comps that sold in last 6 months in same neighborhood is the most reliable. If I can't find good comps, I'll look at other comparable neighborhoods. If that doesn't give me enough, I'll go further back in time but make an adjustment for the difference in the market.

The problem in my area is finding renovated properties to comp- I can find the size, style & location - but rarely the condition. I generally have to make a lot of adjustments to my comps.

The price/sf method is less accurate in my opinion.

I will factor in short sales and REOs but won't use them as a direct comparable, unless it's been totally renovated.

I use pendings and actives to either push listing price higher or drive it lower. If there is low inventory, I'll list on the higher side. If there is a lot of competition, I want to make sure my listing would be priced as a better value (not lower but a better value).

This works for my investor clients as well as my buyer and seller clients. I am usually within a few thousand of my initial ARV.