How can I estimate what my house will appraise for after a BRRR?

Question

I’m looking at houses to BRRR in Massachusetts, but I am unsure how to estimate what a potential house would appraise for after. I assume the bank wouldn’t appraise it for market value in a sellers market? Unless I’m wrong about that? To anyone who has BRRR’ed in the past, how did you estimate the appraisal value for a refinance?

Charlie MacPherson · Answer

@Gert Dervishaj To clarify, if you're using a lender to buy the property, they won't appraise it at the ARV.  Once you've completed the renovation the lender you use to re-fi will appraise it at ARV.

In other words, in each case, the lender will appraise the property at its current condition.

Running comps is relatively simple, but not easy.  You need to find recent sales that are within 1/4 mile if possible - but often there's not enough data in that radius. I then push out 1/4 mile at a time.  Data outside a mile or so becomes less and less accurate, depending on the location.  In some places, even 1/4 mile is too far.  That's where an experienced realtor can help.

The comparable properties need to be as close to identical as possible in style (don't comp a bungalow with a colonial)  and the number of beds, baths, square feet of living area and lot size, garage and basement specs, septic vs town sewer, year built and condition.

A few things I use to look for regarding condition if I can't visit the property - updated kitchen and baths (granite/stainless, cabinets, backsplashes, lighting), landscaping (manicured vs overgrown) and the appearance of the interior rooms.  Those few items can tell you pretty much all you need to know to run comps.

Jay Hinrichs · Answer

you could pay a fee appraiser for a ARV appraisal for your own information.. that would give you a good idea .. or you can go the free route with a good broker..

talk to your refi lender now and see if they will do an Apprasial on ARV  and when the project is done they simply do a 442 and you close this is how we did thousands of them when most turn key was bought using BRRRR

its also how we pre sell new construction.

Mike D'Arrigo · Answer

This is a sure way to get it wrong. A formula can't take the place of solid comps and knowing market values.

Gert Dervishaj · Answer

Hi All,

Thank you for the advice on this. I will be asking my realtor for comps and make sure to keep the subject property as similar as the properties being compared to.

-Gert

DJ Richmond · Answer

@Gert Dervishaj Your Real Estate agent should be able to provide this information. Typically I provide my clients with a recommended offer price based on today’s market value and then what the ARV would be after renovations. They should be able to pull you a list of comps to justify the price.

Jake S. · Answer

Hey @Gert Dervishaj Contact a local Realtor to have them run a market analysis on comp properties to see what it'd be worth

How can I estimate what my house will appraise for after a BRRR?

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