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What Is After Repair Value? – Bankrate.com

If you’re thinking about owning or investing in residential real estate, there’s a term you need to add to your repertoire: “after-repair value” (often abbreviated to “ARV”). Simply put, ARV is the updated worth of a hom…….

If you’re thinking about owning or investing in residential real estate, there’s a term you need to add to your repertoire: “after-repair value” (often abbreviated to “ARV”). Simply put, ARV is the updated worth of a home after repairs or upgrades have been made to it, taking into account its original purchase price and the amount spent on renovations.

Often, ARV is discussed in the context of house flipping, but it’s beneficial for individual home hunters and property investors to understand as well. Here, we’ll explain the basics of ARV in real estate, including what it is, how to calculate it and who should use it.

What is after-repair value (ARV)?

When a person decides to flip a house, they’ll first buy the property and then invest in renovations to increase its offering price on the market. ARV is simply the new, improved value of that property – after the flipper makes all of their desired upgrades, repairs and remodels.

Why is ARV important? Because savvy flippers only want to invest in properties that they know will deliver a profit – and ARV can help them make that determination.

“ARV considers the value of the final rehabbed property and works as a way to find out how much money should be logical to invest,” says Martin Carreon, a real estate broker and owner of SoCo Wine Country Properties, a real estate agency in Santa Rosa, Calif.

In short, ARV is a useful tool to help flippers and other real estate investors decide whether or not it’s worth buying and renovating a particular home based on its potential worth and profitability. If you’re looking to buy a home to live in, it can also be useful — especially if you’re in the market for fixer-uppers.

How to calculate ARV

If you need to calculate the ARV on a particular home, use the following method to get a rough estimate. If you need a more precise figure, make sure to work with an appraiser.

1. Look at comparable properties

Your first step is to find five (or so) comparable properties – also known as comps – that have recently sold in the area where the home is located. You can find these listings through real estate sites like Realtor.com or your local MLS, or work with a real estate agent to find out if they’ve seen any homes similar to the one you’re interested in.

With comps, it’s best to find houses that are as similar as possible to yours in terms …….

Source: https://www.bankrate.com/real-estate/after-repair-value/

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