ARV might be the most abused number in flipping.
I see a lot of deals where everything hinges on one perfect comp at the very top of the market. If that comp doesn’t hold, the entire flip gets tight really fast.
Lately, I’ve noticed the deals that survive (and still make sense) are the ones underwritten with conservative ARVs, realistic timelines, and a little breathing room for surprises. Optimistic ARVs can help get a deal under contract, but conservative ARVs are what actually protect your profit.
Not saying every deal has to be ultra-pessimistic, just that building in a buffer seems to matter more now than it did a few years ago.
Curious how others are handling ARVs right now. Are you leaning conservative, averaging comps, or still pushing top-of-market assumptions?
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They are all over the place. I feel like there needs to be some regulatory body. Lenders, Appraisers, and Agents never, ever agree.
ARV can be a killer on a flip. You can get an ARV that helps you during the bridge loan and then when you go to sell it the buyer's appraisal is lower, much lower. Now what? Things can change in six months.
You need more than a buffer. I have consulted on 40+ fix n flips in the last 3 years and I can tell you from first hand knowledge that a good deal on paper can break you in reality. X factors like market shifts, 3rd party analysis/performance can and will kill you.
The only way to really do fix n flips successfully is to have a large amount of wiggle room. You have to source the property at a steep discount to start. You buy a 100k home for 65k at short sale, foreclosure, or auction. Now you have a 35% head start on the project costs.
Now the house needs 70k in work to get a C/O. Now you are in 135k. But these houses are worth 220k - 250k.
Now you have options. You can give it away on the market for 189k and you still make 50k. Or you can refi out 165k or so and recoup your money plus 30k and get a renter in there.
Deals fail because:
Cost basis is way too high
Team lack of performance
Long Deal cycles
Expensive Carrying costs
I've found a model that eliminates all of the above and it has been working great. 65% return last six months. Longest deal has been 5 months. Shortest 3 months.