How do you boost ARV on tight budget?

Question

I have a short sale opportunity available on a two story 3000 sqft duplex for $27k. I've got a $25k rehab budget. Zillow / Trulia estimate value at $105k.

The place needs a furnace, which will run about $3k installed. Also needs appliances in the kitchens. Will need paint in the interior.

At $52k all in, I need a minimum valuation of $70k. With this rehab budget of $25k, what are some of the best ways to boost the ARV?

Interested to hear your ideas!

Wyatt Franta · Answer

Hey Torend,

Exactly what @Jaysen Medhurst mentioned.

The goal of an ARV valuation is to determine if the property, when renovated, will drive the same demand as surrounding comps, usually within a 0.50-mile radius. Zillow, Redfin, & all of the online algorithm sites are extremely unreliable. Get a Realtor to run comps for you.

Your deal seems to generate a very healthy return, which has me a little concerned your rehab budget may be too low, or Zillow is leading you astray with the property's estimated market value. Double-check your numbers, and if they're still accurate, you hit the jackpot here.

Good luck! (And keep us posted)

Jaysen Medhurst · Answer

ARV is set by the market, @Torend Ebner. If ARV is truly $105k, they you can achieve that by bringing the property in line with comps. Can you achieve that with the $25k renovation? With residential properties upgrades rarely pay for themselves (e.g. $5k granite counter tops don't command a $5k higher price vs. similar home). You make your money by buying below market and putting in the work. Sounds like that's exactly what you're doing.

BTW: I wouldn't trust Zillow/Trulia. Have your agent pull actual comps.

Torend Ebner · Answer

Thanks for the feedback!