Please enter After Repair Value.
Top ARV Tips
- This is where most investors lose money, they overestimate what the house is worth once it’s rehabbed. Investors Achilles heel is big numbers and tend to get “married” to properties. Emotional attachment kills profits. Don’t be sold or buttered up by the seller, listing agent or anyone else involved directly or indirectly with the sale of the property.
- Make sure the information on your subject property is accurate, so when you’re making comparisons to comparable sales that you’re working from accurate and updated information.
- Gather information on the neighborhood, meet with neighbors and do your online research. Contact other realtors who know the area, but aren’t involved with the transaction.
- Use at least three sold comps. Do your own comps, and know how to get legit comps. Don’t use fancy software. Don’t just take your realtors CMA that they provide. In our experience, this is the root of overestimation.
- Count on shifting markets during a 4-6 month rehab process. Are you in the spring or fall? When will the property be listed once it’s rehabbed?
- Know the disadvantages of flipping in a “snow zone.”
Some Statistics
We cannot over-emphasize the natural tendency of over-estimating. 78% of flips do not make money, half of those lose money and a third of those result in financial ruin. Almost the entire 78% was attributed to overestimating.
As a side note, those same statistics showed that the 22% averaged $17,000 in profit on their flips. The spread of the 22% was massive with the majority well under $17,000 and a small group well over $50,000. The difference was experience, if you don’t have enough of your own, partner with someone who does. This will probably not come cheap, but as you can tell it’s worth every penny.
A Caution and Encouragement
Real estate is arguably the single most profitable business to get into. Always has been. And always will be. People rob each other for $5, imagine what happens when tens of thousand of dollars are involved.
Having said that, real estate can absolutely change lives! It takes a few successful flips to replace the average Americans entire annual income. If you go into this business with open eyes, it was is one of the most exciting opportunities to be involved with. Of course, we are slightly biased.
Need more information? Everything can be obtained by searching online. This site is not specific to a particular way of flipping, it is common “industry” standards and practices only. But you are welcome to contact us – we are a members-only flipping and funding company.
Keystone Funding Network