What is ARV and How Do You Calculate It?
In real estate the ARV or After Repaired Value is the definition that states the value of the property after it has been remodeled or “rehabbed”. Essentially this is a future value for the property in it’s future condition.
A Very Basic ARV Formula
After your property is remodeled more than likely an appraiser will be asked to go out ot the property and determine its current value. This may be for your future buyer, possibly for your lender or perhaps for the real estate investor.
The ARV could simply be defined as follows: Purchase Price + Value From Remodel = ARV or After Repaired Value
The appraiser will also base the value by using comparables of recently sold properties as close to the subject property as possible with the sale dates being as recent as possible. The appraiser will use recent sold comparables of other property’s in “like” size and condition with the similar lot size.
As an investor that is looking to fix and flip real estate, knowing what your ARV or after repaired value will be is crucial when investing. The ARV or After Repair Value is the future estimated value of the property after it has been rehabbed meaning it has been fixed, repaired, renovated. After the work of the property is completed, the ARV will be determined by using comparables (properties near our subject property that are as similar in size, age and style as possible to our renovated property) Having a precise and detailed idea of what the repair costs will be, is vital for getting the After Repair Value and if the property will be worthwhile to an investor. Finding the ARV is important
To determine what the maximum loan amount will be, but most importantly it will give the investor a sense of what the profit will be when flipping the property.
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