Realtor · Cincinnati, OH · Member since 2021 · 37 posts · 16 votes
I want to get better at calculating ARV by being able to factor in any adjustments that i may need to make to my numbers.
whats a good eqution, or method, for doing this?
im actively researching as i type this post and something that i've come across is finding the AVG SOLD PRICE and the AVG SQFT of properties in the same area of my subject project and dividing the 2 numbers (AVG SOLD PRICE / AVG SQFT) to get the AVG PPSF
then, take the AVG PPSF and multiply that to the SQFT of the subject property to get the ARV.
Would this calculation be a good method to better estimate the ARV of a property?
@Damian Walker There's so many ways to calculate everything and your methods are great but you're probably over thinking it.
When we calculate the ARV we narrow the search and comps. I think calculating an ARV is more art than science. The property type, sqft, layout, REHAB QUALITY, age, and street noise are the big factors we look for. When I jumped into REI I was told use to use the last 6 months of sold comps (average) but any more I narrow it to 3 months since the FED keeps raising rates and changing market dynamics. The interior photos of said comps is massively important. If your comps have remodeled kitchens with granite countertops and yours doesn't that's a "ding" on your price. If you have a new roof and others don't that's an "advantage" on your price. Piece by piece it adds up. RE agents pick houses apart all day long and get paid to do so. This is art part and experienced RE flippers are masters at it. We have remodeled a handful of property so we're not masters, but working with a local agent is really helpful. I have a good idea of my ARV before gathering outside opinions. There's calculations, spreadsheets, and I'm sure A.I software doing this stuff but where's the fun in that!
@Damian Walker There's so many ways to calculate everything and your methods are great but you're probably over thinking it.
When we calculate the ARV we narrow the search and comps. I think calculating an ARV is more art than science. The property type, sqft, layout, REHAB QUALITY, age, and street noise are the big factors we look for. When I jumped into REI I was told use to use the last 6 months of sold comps (average) but any more I narrow it to 3 months since the FED keeps raising rates and changing market dynamics. The interior photos of said comps is massively important. If your comps have remodeled kitchens with granite countertops and yours doesn't that's a "ding" on your price. If you have a new roof and others don't that's an "advantage" on your price. Piece by piece it adds up. RE agents pick houses apart all day long and get paid to do so. This is art part and experienced RE flippers are masters at it. We have remodeled a handful of property so we're not masters, but working with a local agent is really helpful. I have a good idea of my ARV before gathering outside opinions. There's calculations, spreadsheets, and I'm sure A.I software doing this stuff but where's the fun in that!
Never calculate ARV based solely on price per square foot. Use it as a reference only if the comp has the same features, beds, and baths. Comps with different beds and baths might sell for more or less per square foot.
I probably am over thinking it, but also, I want to provide an offer that makes cents (get it? lol) and doesn't come off as I'm trying to low-ball the seller and potentially lose the deal.
Should I just keep it simple and just make sure that my comps fall along the same lines (e.g. property type, sqft, layout, etc.) of my subject?
I probably am over thinking it, but also, I want to provide an offer that makes cents (get it? lol) and doesn't come off as I'm trying to low-ball the seller and potentially lose the deal.
Should I just keep it simple and just make sure that my comps fall along the same lines (e.g. property type, sqft, layout, etc.) of my subject?
Damian, yes, and yes you'll probably make low ball offers. We have "low balled" on every property! 25% below asking feels low but trust me it's not (if you're aiming for distressed opportunities). Look at what other investors did in that neighborhood. You should be shocked at what low actually looks like. It's so important to make some $$$$ on the buy side.