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.
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