Determining The Rehab Costs And ARV?

2 Replies

I have a property that i feel would be good to do a deal with. It is listed with another agent and he has been sitting on it for a while and is willing to negotiate on the price. I asked if he knew the rehab costs or ARV and he said he didnt have those numbers. Can someone tell me the best way to go about figuring out those figures? Thanks for the help in advance.

Hmmmm. 

You think the property would be good to deal with but don't know how to calculate the ARV or the rehab? Thats always a bit of a red flag. Be careful not to jump into any deals until you're sure you can come up with rehab estimates and ARV numbers on your own.

One of the best ways for you to come up with a rehab budget is go into the house and make a list of all the items you want to have fixed. Then ask a couple of contractors to come look at the house with you and give you a bid for all the items on your list.

As far as ARV, you could ask a realtor to give you an estimate on what they think they would list the house for once you completed the rehab (and give them the items on your rehab list so they know what would be fixed up and what wouldn't).

The best way to come up with ARV is look at the sold houses in that subdivision that are similar in terms of bedrooms, square footage and year built. The sales should be in the last 6 months. That will give you a reasonable idea of what it should appraise out at.

Hope this helps. But I'd suggest you hold off a bit on buying anything until you're a little more comfortable with coming up with estimates and ARV numbers - even moreso if its a flip. For a rental, if you miss your numbers, it just means you have to dip into your pocket more and your returns aren't as good. For a flip, the difference could end up meaning you lose money on the deal....

Originally posted by @Mike H.:

Hmmmm. 

You think the property would be good to deal with but don't know how to calculate the ARV or the rehab? Thats always a bit of a red flag. Be careful not to jump into any deals until you're sure you can come up with rehab estimates and ARV numbers on your own.

One of the best ways for you to come up with a rehab budget is go into the house and make a list of all the items you want to have fixed. Then ask a couple of contractors to come look at the house with you and give you a bid for all the items on your list.

As far as ARV, you could ask a realtor to give you an estimate on what they think they would list the house for once you completed the rehab (and give them the items on your rehab list so they know what would be fixed up and what wouldn't).

The best way to come up with ARV is look at the sold houses in that subdivision that are similar in terms of bedrooms, square footage and year built. The sales should be in the last 6 months. That will give you a reasonable idea of what it should appraise out at.

Hope this helps. But I'd suggest you hold off a bit on buying anything until you're a little more comfortable with coming up with estimates and ARV numbers - even moreso if its a flip. For a rental, if you miss your numbers, it just means you have to dip into your pocket more and your returns aren't as good. For a flip, the difference could end up meaning you lose money on the deal....

 Thanks for your help and insight!

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