How do you determine a home’s potential value after renovations.

Question

I am a first time home buyer. I have been pre approved and am looking for potential homes to flip. However I am struggling trying to determine what the resale value of a home would be after renovations. I have checked everything I can on the home including property appraisers, recent home sale values, and tax records. I just want to make sure I am making the correct evaluation and am curious how you guys would determine a potential purchases ARV. Any input would be appreciated. Thank you.

JD Martin · Answer

For the most part, value is determined by:

1. Location

2. Square footage

3. Number of Bedrooms and bathrooms

4. Amount of property

5. Overall condition

If you can't improve #2 or #3, you won't have much gain on the property unless it is a total train wreck, since you can't usually change #1 or #4.

Figure out how much a property in good condition is worth that is the same specs as what you are considering and you have your answer.

Kenneth Garrett · Answer

@Shawn Ziegaus

When you look at comps you have to look at updated similar properties.  Example a 3/2 2,000 square feet two story home in the same neighborhood.  All updated.  Look at the finishes and estimate what your rehab numbers are based on the work.  Calculate your buy, rehab numbers, holding cost and profit.

Buy $100,000

Rehab $40,000

Holding cost $10,000

Total $150,000

Sale price $200,000

Closing cost $10,000

Profit $40,000