ARV or After Repair Value


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In real estate investing, the biggest factor in determining if a property is a good investment is the cost of it. However, most people think the cost is the price of the property. Yes, getting a 1200 sq. ft. home for $10,000 is a steal. The actual cost of the property also includes the cost of repairing it. If the price of the property plus the cost of fixing it to sell is too great, the property may not be a good investment.

This is where having a good general contractor on your real estate investment business team comes in very handy. The general contractor will be able to help you walk through the property and figure out not only the estimated cost of repairing it but also the ARV.

The ARV or After Repair Value is the estimated value of the property after all repairs are completed. In order to obtain a good ARV estimate, you will not only need pretty accurate repair estimates, but also good comps or comparative market analysis of homes in the area. These can be obtained by going through courthouse property records, title companies, or other real estate professionals. If you use a  specific real estate agent for your business interests, they will be a good resource for your team in figuring out the ARV of a property.

Your real estate investment business team members can help you figure out if the property stats, including the ARV, price, cost of repairs, and housing market, add up to a good financial investment.

Checklist

Before you put down any money, you should know if you are able to do the work or able to afford the contractors to get the work done. You should have an accurate cost of repairs, and you should be able to afford them. You should also have an accurate estimate of the ARV or After Repair Value.

This checklist will help you and your real estate investment team make the best business decisions. If your investments are not selling or you find yourself spending a lot of money on repair costs, your ARV estimate or repair estimate may be off. Being off on these numbers has a huge impact upon the profit attained from an investment property. Always try to allow a little extra wiggle room when looking at the property numbers.

For more information on real estate investment or real estate franchises, visit us at homevestors.com.

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