After Repair Value - How to Calculate Value?

4 Replies

Hey Guys !

I am new to the Bigger Pockets website but have been following the podcast and videos on you tube for quite some time now.

I'm interest in Fixing and Flipping but the one thing I can't seem to get any specifics on is calculating the ARV and how to figure out what kinds of improvements are valuable and worth it versus improvements that are not.

How do I know the house is going to be worth X amount of $'s more when I add a bedroom or garage?

For Example:

If I had to choose between adding a bedroom or re-doing the laundry room/expanding closet space.

How would I know which one is going to  be more valuable over the long term?

I hope my question makes sense.

look forward to hearing from you guys.

Some of it is experience and common sense. Easiest way is to look at what things are selling for per sq/ft in that area and do the math. Look at what's sold, for how much, how many days on market and make comparisons to what yours would be like. ARV is just a guess, at the end of the day the house is worth what somebody (who can pay you) will pay you. The more educated you get the smarter your guess will be.

If you have the chance to add a bedroom or bathroom....I'd say go for it......Most homes increase in value when you add a Bedroom or Bath.....Here's my list of priority renovations when updating/rehabbing

1) Kitchen and Bathrooms

2) Bedrooms

3) Living spaces (Living room, dinning room, den)

4) Curb Appeal / Landscaping

5) Windows.....yes believe it or not windows are a big plus

6) Upgrading or new flooring

7) Finishing a basement

Those are the big ones.

Don't forget to add your costs to the ARV to get your NET ARV......I use 10% to be safe, others use 7-8%.....so if the ARV is $300K......use $290 as the Net ARV. Also take off 1-1.5% on the front end for closing costs and another 1% for carrying costs. This will keep you safe. Good luck.