Flipping houses is a popular form of real estate investing. This type of investing involves some level of rehabbing from cosmetic changes all the way to a full remodel.
When buying these types of properties, the investor usually pays well under market value with the knowledge that they will be investing both time and money to update the property before the sale. If the investor plans to flip houses, they need to understand ARV or After Repair Value.
The investor knows the purchase price and needs to determine the After Repair Value. This is the only way to know if rehabbing will be profitable. The investor should be aware of the local market conditions. Most investors do research on the properties that have recently sold within the target neighborhood and that are comparable to the subject property. It is best to use at least 10 properties in the same neighborhood that have sold within the last 6 months.
Conservative investors take the lowest sale price of these properties and use that as the ARV to ensure the deal will be profitable. The investor needs to do their homework so it can give them a sense of confidence in being able to determine the property’s value once the renovations are complete.
You can use our DNA report which will give you all the information that you need to help you arrive at the best ARV.
