In today’s real estate market, property investors look at specific ARV as the end-goal that their investment property must reach. However, in the last few years, it seems that this “ARV goal post” was in constant movement. How do you reach a goal when they keep moving the goal posts?
2008 and 2009 were frustrating years. As market values started to slide, the ARV that you’ve determined today could not hold by the time you acquire your property and had it rehabbed. That $120,000 ARV that you’ve correctly determined in December, could possibly not be valid “according to the bank” by the following March. In a matter of 2 to 3 months, when it was time to refinance or sell your property, the bank has determined that your ARV was actually now around $108,000 – a nice 10% drop! A constant frustration.
So, what is ARV? Well, it’s exactly what After Repair Value means, the value of your property after it’s been rehabbed and ready to be flipped or rented. That’s the number that will determine your return on investment – of course assuming that your other costs have been accurate.
Often we receive questions from investors that they have looked on various online real estate websites, such as Zillow and the value of the home they have is either too high or too low. Why they ask? Because Free data is worth just what you pay for it… NADA.
Well, it doesn’t matter what Zillow or willow or schmillow say the ARV is. What matters is WHAT DO THE COMPS IN THE AREA SHOW THE ARV IS. Pull the data from your InvestorCompsOnline account and analyze them with these top three things in mind: year built, square footage, and room count.
The typical comp parameters for real estate is at least three (3) sales of similar property as the subject home, within the past 6 months, within a mile of the subject property. If you can’t find 3 sales, then the parameters are expanded incrementally.
Make sure you are using the right numbers before you decide to get involved with a deal. Use your InvestorCompsOnline account and the support desk if you are having any difficulties.