After repair value or ARV for a fix and flip property is an estimate of a home’s potential value after completion of all repairs needed for the property to be livable. The ARV could be thousands or even millions of dollars more in value compared to what the property was worth before rehab.
General Concept
After repair value is a calculation of three points:
- The current value of the property
- The cost of rehab or renovations
- Market value or appraisal
The ARV helps you determine your profit margin before starting the fix and flip process. The total ARV can vary for each property based on each deal scenario.
Calculation
You can calculate the ARV by using a few basic steps:
- Review the current value of your property. The value is also called “as-is value”. You can find out the current of value of a property by requesting comps from your real estate agent or appraiser
- Note the specific renovations you’ll have to conduct. You should get proper estimates from a few contractors in order to determine the total rehab cost for the fix and flip project
- You can also compare the subject property with others in the area. Take notes of all your numbers to make sure the total cost makes sense based on your profit margin goal.
Additional information to consider
There are a few additional rules you may want to follow in order to determine the ARV of a fix and flip property. These rules concentrate on confirming the ARV value that you are aiming for:
- Review the conditions of the target homes. You can look for data from the past few years if necessary.
- Visit those properties yourself if possible. A closer look can help you figure out if the deal is worth it
What Properties Should You Compare?
ARV review can include reviewing specific properties in the local area where the target property is located
- History of homes in the area that were sold in the past
- Homes near the target property; these include homes with the same square footage and the types of rooms as what you have
Real Estate Funding Solutions is one of the top recognized mortgage lenders. We help clients throughout the US with all their Real Estate Financial needs – Commercials, Residentials, Fix & Flips, Refinances, and New Constructions. If you have any questions regarding any of our financial products and services, feel free to contact one of our nationwide mortgage specialists via email or phone