ARV – After Repair Value in Real Estate Investing

Posted on: July 24th, 2008 by admin No Comments

If you're going to flip properties, you need to understand ARV.

Real estate investing, particularly flipping properties, frequently requires that a purchased property be rehabilitated in some way. Usually it's cosmetic work and repairs. The successful investor must address several items carefully:

Is the investor capable of doing the repair work or able to locate and properly supervise contractors in getting the work done?

  • Has the investor accurately estimated the cost of all remodel and repair work?
  • Is there an accurate estimate of the ARV or After Repair Value of the property?

All these steps must be completed with accuracy. You'll not be investing and flipping long if your costs to refurbish the property run over estimates, or if your ARV is calculated incorrectly. Many investors know their area and markets well, have adequate home sales records similar to the subject property, and feel confident in their ability to ascertain the value of the property once they've completed renovations.

For those who aren't sure, use a real estate professional to do a CMA or Competitive (Comparative) Market Analysis on the home as if all work were completed. Of course you could also use an appraiser, but generally you'll do just as well working with a real estate person that knows their business and the area. If you list with a REALTOR, then that's the person to ask.

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