I have been playing with the numbers of a few rehab MFRs in the St. Paul area and am wondering what factors some of you prefer when estimating the ARV ($/sq.ft., comps, rent ratios, location, etc.). There's a plethora of factors to consider and I definitely don't want to over-estimate. I'd love to hear some suggestions (outside of consulting my agent) on how to improve the precision of my analyses.
There's a few properties that I believe have solid value-add potential both in the condition of the properties as well as their pro forma rents. I hope to get into one of the properties via FHA and use the majority of my capital and make improvements. In a perfect world I'll earn a significant return on the forced appreciation, allowing me to cash-out refi/HELOC in 12 months.
Any thoughts, resources, or suggestions would be much appreciated!
@Nick Jordan It's important to distinguish between ARV and your ROI. The ARV only has one on small MFR's (2-4 units) and that is they sold comps. Rent ratios are a way to determine the ROI, you can use $/sq/ft and location but its all based on the comps.
@Tim Swierczek Thanks for the response.
The properties I'm looking at are 2-4 units and have seen better days. My biggest concern is budgeting the projects that will optimize the appraised value for when I want to pull equity for my next project. Your suggestion of comps and location are helpful--a few of the deals don't seem so glorious (Shocker!).
@Nick Jordan be careful on rehabs. The market is priced such that poor condition is currently overvalued. I'm not saying you can't find a good deal, it's just the amount the house is discounted based on the condition is not likely as much as you will spend to bring it back up.
Thanks @Tim Swierczek , I appreciate your expertise. Any other caveats for a newbie with value-add aspirations?
@Nick Jordan That's at least an hour long conversation maybe 2. PM me and let's meet for coffee.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing