ARV (After Repair Value) - The After Repair Value is the fair market value of the property after property renovations. After Repair Value is the resale value of the property at which you think you can resell the property for after you have remodeled the property.
The After Repair Value is the amount you think you can resell the property for after it's been renovated. In order to know the After Repair Value, you need to research your market and recent comparable sales of similar properties.
To estimate the After Repair Value of a property you want to step into the shoes of an Appraiser. Home Appraisers use an appraisal method called the Sales Comparison Approach which compares recent comparable sales of similar properties in the area.
To estimate the value of a property the Appraiser will 'pull comps' of 3 to 5 comparable properties that have sold within the last 1 to 6 months (more recent the better). Recent comparable sales should be in close proximity to your property, have similar square footage, # of beds/baths, similar level of finishes and amenities.
The Appraiser then compares the 'Subject Property's' features and amenities with the comparables and makes pricing adjustments up and down to create an equilibrium and make the properties apples-to-apples. The Appraiser then uses price adjustments to adjust the Sales Prices of the comparables to estimate an approximate value of the 'Subject Property'.
In order to quickly and accurately predict the After Repair Value of a property you need to have a 'pulse' on your market and understand the value of comps in your area.
Here are some basic strategies for getting a pulse on your market:
Narrow down your market research to specific School Districts and Neighborhoods. Trying to focus on too large of a market will have you stretched too thin. Narrowing down your search and focusing on a specific segment of the market will help you develop a better pulse on the market, market values, competition.
Once your business starts to grow you can start to grow your farm area & expand your market reach.
The best way to get a pulse on your market is to get daily email notifications of new MLS listings in your 'farm area'. Find a local Real Estate brokerage, setup an account & setup your property criteria to get daily notifications of new listings. Every morning you will get a new batch of listings which to help you get a pulse on the competition & sales values on the market.
Although Daily MLS Notifications will tell you what's currently listed for sale, it doesn't tell you the actual sales price the property sold. In order to really see what properties are selling for, you need to get access to the MLS.
To really understand your comps and competition, you should physically walk through the properties for sale in your neighborhood to get a pulse on the competition's pricing and finished product. This will help you understand exactly what kind of flipping competition you are up against in your market.
Learn More About How to Comp Properties and Calculate the ARV
