FLIP YOUR MONEY!
How to Understand ARV
Are you thinking about flipping properties as a part of your real estate portfolio? It’s easy to get excited about it with all of the HGTV shows and home improvement magazines. However, as a real estate professional, understanding After Repair Value (ARV) is major in the big scheme of things. You don’t want to start the process of flipping a property, identify more issues than you imagined, and have your ARV be lower than any profit you’d be able to take from the deal. ARV is essentially what you believe a property will be worth after you've set it up – what value you think it'll bring in its better than ever condition or at least as good as you could get it without bulldozing the entire structure. Becoming a wise professional in this niche starts with understanding the market, your hard and fast funding boundaries, and what you plan to profit.
It boils down to this.
Property's Current Value + Value of Renovations = ARV
Here’s how to get the most out of your flipping experience.
- Understand the property value you’re seeking to renovate. Purchasing a nice markdown with minimum repairs is ideal, but it doesn’t always happen that way.
- Have an investor/buyer in mind before you begin the flip. You have to make sure the person you’re looking to sell this property to will actually pay for the property after everything is said and done.
- Choose a contracting company that will truly help you assess your materials and labor as accurately as possible. Know what your contractor and his/her team can do before you hire them or buy the property.
- Know your “comps”. In the real estate world, this is the part where the rubber meets the road. Making sure you’re competing in reason with what is happening in the specific area where the property is located is important. This is where your team of real estate agents will come in handy. <insert back link to who should be on your real estate team>