If you are willing and ready to begin as a single-family rental home investor in Kingman, one of the most vital terms you first need to grasp is After Repair Value (ARV). The after-repair value of a property relates to the value of a property that has been successfully fixed up or renovated. More particularly, ARV speaks about the estimated future value of the property, including all of the repairs and developments. To find out your property’s ARV and use it effortlessly, you will first need to perceive how to calculate it in an appropriate manner. Keep reading to glean the steps to correctly calculate the ARV for any investment property.
Research Market Analysis
One of the effective ways to calculate your property’s ARV is to accomplish a competitive market analysis. By seeing comparable properties (comps) that have recently sold, you can get the right idea of what your property’s new market value will be. Lots of investors begin by seeking the multiple listing service (MLS) for recently sold properties that are the same as your fresh, renovated rental house as possible. For instance, you would want to detect comps that are matching your property in age, size, location, construction method and style, and condition. Especially, look out for at least three recently sold comps (i.e., sold within the last 90 days) that detail recent enhancements or improvements.
Calculate ARV
Once you have found three or more suitable comps, you can then calculate your property’s after-repair value (ARV). There are two usual methods:
- Find the average sales price of comparable properties. Take one example, if you found three perfect comps, add their sold prices together, then divide by three, you would have the average price. This number is your property’s after-repair value (ARV), a number that is supposed to be used to estimate the likely sales price of your own single-family rental house after upgrades and repairs.
- Find the average price per square foot of your comparable properties. Divide the total sales price by the average square footage of your comps. With an average price per square foot, you can then multiply that price by the number of square feet in your rental property. This procedure can be a bit more exact than the first option, but it does require many other steps.
Utilize Your ARV
Once you identify your property’s ARV, you can use it in several ways. Particularly, it can aid you to set a more precise rental rate. By ascertaining how your newly renovated property compares to others in the neighborhood, you can make it a point that you are increasing your rental home’s potential. Another procedure that investors customarily use after repair value is when obtaining investment properties.
When putting up money for a new investment property, you may like to take 70% of the property’s after-repair value and subtract the costs of repairs and improvements. The resulting offer price can then assist you to learn and know where to start bidding for a property. Occasionally, investors may go as high as 80% ARV, which inevitably multiplies the chance of an acceptable offer. Needless to say, the higher the ARV you use to have knowledge of your offer price, the higher the risk for your profit margins after the fact.
Calculating an accurate after-repair value takes practice and actual skill. While masses of investors learn to do so on their own, it can be advantageous to rely on the ability of a real estate professional or property management expert. Either one can support and help you locate comparable properties and make certain that your calculations show the true nature of the property, its location, and its future prospects as a rental house.
Have you recently fulfilled renovations on your investment property? Contact Real Property Management Northern Arizona and ask for your FREE rental market analysis to make it a point you stay competitive. Call us at 928-757-7368 to speak with a Kingman property manager today.
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