After Repair Value (ARV)

How to figure out ARV

A comparative market analysis (CMA) is one way to figure out how much a home will be worth after it has been repaired and renovated. You can hire an appraiser to do this for you or do your own rough calculation. Using online platforms such as Propstream, Freedomsoft, Zillow, Redfin, etc. you can quickly determine the ARV for any property you make an offer on.

Here's how to figure out a home's value:

1. Find properties in the same area. Ideally within 1 mile of the subject property. The best way to figure out a home's value is to look for real estate comps, or sales that are similar.

   • If your investment property is less than a mile away from other properties that have recently sold within 30-90 days you can use those sales prices to calculate your ARV.

   • Prioritize properties that have features that are similar to how the deal will look when it is repaired and renovated (rather than its current condition).

   • Try to find homes with the same square footage.

   • As a bonus, the comps you choose should have the same number of bedrooms or bathrooms as your home but it is not absolutely needed.

   • Also, you can look through multiple listing services or talk to local realtors or real estate agents.

2. Compare the prices per square foot of the homes that are in the same neighborhood. Then, after you find a few properties that are similar, divide the price of each by the square footage.

   • For example:

     • if a home with 3,000 square feet sold for $300,000,

     • its price per square foot would be $100 per square foot.

     • Compute the price per square foot for each home you're looking at.

     • Then, add them all up and divide by the number of homes you're looking at

     • This will give you the average price per square foot for homes in your area.

3. Use the price per square foot to figure out ARV. To figure out how much the house will be worth after you fix it, use the ARV formula.

   • You can figure out your home's value by taking the price per square foot of the properties that are similar to yours.

   • Suppose the average price per square foot is $100/sq. ft., and

   • your property is 1,500 square feet.

   • The ARV of the property would be $150,000, which is how much it would be worth.

*This figure is just an approximation, because the real estate market, local trends, appraised value, and other factors can make or break the sale of a home.

What Is After-Repair Value?

The ARV of a home or investment property is the market-determined likely sales price. Keep in mind that when evaluating ARV, the term "repair" is used quite loosely—it encompasses a lot more than just fixing any significant issues.

ARV covers things like:

• Laying new flooring,

• Replacing the roof,

• Replacing counters,

• Painting,

• Adding/upgrading bathrooms.

Consider living next to a newly remodeled home with granite counters, new flooring, and updated bathrooms. Even if your houses were similar before they updated, theirs is now worth more. It's ridiculous to expect your house to sell for the same amount if they advertise theirs without you doing the same.

*Click here to learn how to run a Comparative Market Analysis

What Can Affect ARV?

The number of bedrooms and baths, as well as the square footage and lot size, define the majority of your home's value. However, there are additional factors that influence a home's worth.

If your home has any of the following garage and none of the comparable properties have one, you can bet it will be worth more in the same condition.

• Basements,

• Sheds (if in good conditon and usable),

• Carports,

• Finished attics/basements,

• Working solar power

• Tornado shelters (if necessary due to location),

• and any other amenities that can increase the value of your home can be considered when comparing homes.

What doesn’t affect ARV

There are a slew of other factors that won't effect pricing but will affect how quickly you sell your home. These should not be taken into account while calculating ARV:

• Taking down a wall between two living spaces to create a more open concept,

• Paint color

• Pools (depends on the area and condition)

• Overly decorated landscaping

• Personal and custom features

Many of these can have a big impact on how appealing a home is to potential personal buyer, it won't have much of an impact on the price you can get for it from an investor.