# ARV practice: will you guys help me?

11 Replies

I'm still having a bit of issues on getting the formula right on this so that me and the end buyer will both profit from a deal after helping a seller. Since I'm wholesaling I was told there's no need for an inspection, these numbers are from a possible deal I've held info. on from a seller. As of now I believe the seller is still renting his property but might consider still selling it, regardless I want to focus on getting this ARV right, so could you guys tell me what I'm missing here.? Also how do you know what the average price range that a rehabber or end buyer will pay for.?

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bdrms: 3

baths: 2

Sqft.: 1,150

Sold comps. (6mnths): \$98K - \$189,900  ( View Here )

H.O.A: \$200

Free & Clear (no mortgage)

ARV: \$98k

x.60 = \$58,800

x.70 = \$68,600

x.75 = \$73,500

- Repairs: \$O (seller was fixing it up at the time)

- Profit: \$10k

----- max offer(s) ----

= 1: \$48,800

= 2: \$58,600

= 3: \$63,500

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I included all 3 possible numbers for each % and the max offer for them, does any of this work, or would it have been better if i used the other range of \$189,900? Thanks so much guys for you're help.

Hey Octavia, there is a basic formula I was taught to use to find the ARV which is:

Add the 3 highest comps in area

Divide them by 3 to equal ARV

ARV Ã .55(percent) to .70(percent) - repair costs(sqftÃ\$7-\$10) - \$10k(your commission) = your offer

I learned this from Sean Terry's flip2freedom book and podcasts.

Not saying this is the best or only way but I haven't had any issues with buyers or sellers since implementing it!

Remember, everyone has a bottom line number and you should too, you don't work FOR them you work WITH them, if there is no money to be made then it's not the deal you want to be in.

Also, the best way to find out what the average price range is, is to ask for their price points, it cuts down on the guess work and makes better use of everyone's time, especially yours!

Also check out findcompsnow.com, a fellow member referred me to this site!

Hope this helps!

Oh and as far as an inspection goes, you should always try to get eyes on any property you are putting under contract, just so you know what you're getting into and how to better price your offer but it's not a requirement (for you), however, the buyer is responsible for getting an inspection done before the purchase, unless the initial contract states otherwise.

Thanks so much albert

Why would you add the 3 "highest" comps?  Then you are giving yourself a best case scenario?  I might want to look at the lower comps because it's better to hope for the best but plan for the worst.

@Dawn A.   I am a "plan for the worst" type of investor myself.

Chances are if he "might" be interested in selling sounds like there may not be enough motivation for him to sell at a deep enough discount to even be a deal.

I would take the top five comps, leave out the highest comp, then take the average of the remaining four.

But 70 percent of arv minus repairs minus your fee equals your offer is a good place to start. I would still calculate at least five dollars per square foot for repairs as a cushion.

This formula will get you a ballpark offer to test for motivation. If he's interested get it under contract and move forward with inspection to get your hard numbers. Make sure to have the proper escape clauses in your contract should you find the numbers just don't work. Hope that helps!

I would average comps by, lowest-middle-highest, then average them out.

i do worst case too. I have access to MLS. So I take fully rehab comps. And avg that out.

And even add higher priced dated home if no fully updated home in area.

I always give my clients my conservative Arv. But tell them homes do sell at \$highest#

Advise them to see if that is what they are going to do or what our house is lacking to get that #. Or need to add to get there

Originally posted by @Albert Paul :

Hey Octavia, there is a basic formula I was taught to use to find the ARV which is:

Add the 3 highest comps in area

That's a wholesaler's method if I ever saw one, not accurate but it sure will look better on paper when you try to pitch it.

Wow thanks guys so much for all you're help, I will try out the lowest comps ( Michael & Dawn) and then add \$5 per sqft. ( Andy ) for repairs as a cushion.

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Question:

1) How does one know how much a rehabber will pay for a property?

2) How much profit are they trying to make off a deal.?

3) Using the lowest comps. for this post, should I use the 70% or 60% for the "plan for the worst" option?

4) What does it mean to be conservative when using the 60% rule?

Originally posted by @Dawn A. :

Why would you add the 3 "highest" comps?  Then you are giving yourself a best case scenario?  I might want to look at the lower comps because it's better to hope for the best but plan for the worst.

I don't always look at the highest comps, but I sure don't look at the lowest. I notice the investors I sell to are always looking at the higher comps anyway.  Unless it's some one off wacky deal.

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