fbpx

How to Calculate After Repair Value 📍

To calculate the after repair value of a property,

Simply find the average sales price per square footage of sold properties in the last one year within one mile radius of the subject property

…and multiply by its square footage.

Shall we break that down?

How to calculate after repair value QUICKLY.

Have you ever wanted to have a detailed understanding of how to calculate the after repair value of a property?

Or should I ask…

Are you even clear on what the after repair value is…

…what is after repair value or the ARV for short?

In this guide, I will break it down into its pieces and put it back together for you.

That way…

You too can claim full understanding of it when you meet another wholesaler or investor throwing the word around.

In real estate investing, a rule of thumb is to exit before you enter.

3 Stages to Conquer Before the Wholesale Real Estate Deal Stage…

We make our money while buying into the deal by negotiating a very deep discount; not when selling.

Most times, the value that fix and flip investors get to add to a property is the repair.

But even before the repair, the question that an investor wants answers to is what the subject property is worth after repair;

Hence the concept… after repair value (ARV).

What is Value?

While that may sound like a stupid question,

I found that the word does not carry the same “value” in the eyes of every beholder.

One thing you should know is that “value” is in the eyes of the receiver.

So just because you think you are offering a product, service or offering of value does not always equal to valuable to the receiver.

This is especially true when you have gross disregard for the true meaning of value; i.e it’s in the eyes of the receiver.

With the proper understanding of the nature of value, you can then reverse engineer a valuable offer for your target receiver.

With that being said, after repair value is essentially what a piece of real estate property would be worth after an upgrade or repair.

One of the key embedded rules there, is that there should be other ways to determine that before purchasing and repairing the property.

If you repair first, it may be too late before you can avoid losing money from “value speculation.”

So as in investing and wholesaling, you want to know the ARV first; 

You have a few options to find the ARV of a property of interest.

Amateurs would go trying to extract ARV from Zillow but that platform is set up for consumers and not people who want to make money.

The most professional ARV report you can have is from a certified appraisal which can cost anywhere from $150 – $750; that’s also not necessary.

It is a major ingredient in the wholesaling formula which is available with a free ARV calculator at www.DealEstimator.com

As opposed to setting up a manual after repair value spreadsheet, you can bookmark that for use anytime.

So needless to say, yes you can and should get the ARV of a property before the commitment to purchase and repair.

These are some of the factors outside of the actual subject property that determines its after repair value; Inventory or Supply, Interest Rate, Demand and most especially…Location 

So Like I said earlier, to calculate the after repair value (ARV) of a property, we need to:

  • Find the average sales price per square footage of sold properties (comparable or comps)
  • In the last one year 
  • Within one mile radius of the subject property and 
  • Multiply by its square footage

It’s the same formula to determine a rental ARV.

But the rental income may or may not influence what one is willing to invest in a rental property.

I say that because newbies would sometimes try to use rental income alone to justify market value speculation.

The smaller the number of rental units is, the more you should pre-evaluate for ARV.

…just in case of a need for a quick exit.

65%, 70% or 75% of ARV?

Once you determine the ARV of the property, you then have to create your gross profit upfront.

You want to multiply it by 65%, 70% or 75%

…depending on what market and competition level in that market is.

Check out DealEstimator.com

To gather comparable (comps) and determine after repair value in one or two clicks, also check out www.EmpireBIGData.com

Frequently Asked Questions

What is the 70% rule in house flipping?

The 70% rule is a factor multiplied by the after repair value to create profit in real estate investing before buying into a deal.

How do you calculate an ARV?

Simply find the average sales price per square footage of sold properties in the last one year within one mile radius of the subject property

…and multiply by its square footage.

What is a good ARV?

A good ARV is subjective because it is only good if it creates enough profit that makes the deal worth the investor’s time.