How to Estimate the After Repair Value of a House to Flip

Want to start flipping homes but don’t know what to look for when evaluating a property? It’s an easy trap to fall into, especially for first-time investors. You have so many questions and no real direction -- until now. Let’s take a closer look at one of the key factors that will determine how quickly a fixer upper might sell after rehab -- its ARV or After Repair Value

What’s an ARV?

The ARV is a metric used by investors in order to determine how “strong” an investment property is. Essentially, it’s an estimate of what a property is worth after all of the work has been done. You simply estimate how much rehabilitation has been put into it, along with the sales of similar properties in the neighborhood (once the appraisal of your own property has been done). This gives you a general number to aim for when it comes to selling the property on the real estate market.

How Do You Calculate the ARV?

So, how exactly do you calculate this number? The first step is to apply for a loan. The lender will lend up to a certain amount which is a percentage of the ARV. Generally speaking, this is up to 70%. Any more than that, and the investment is looked at as being riskier. This means you’ll need to calculate the loan to ARV ratio.

Doing this is simple -- just divide the loan amount by the ARV. To illustrate, if you have an ARV of $250,000 after a home is fixed up, you could get a loan of up to $175,000 to fix it up -- an amount of exactly 70%.

How Do You Get a Loan to Buy a Property to Fix and Flip? 

It’s an exciting time for real estate investors who are looking to dip a toe into the fix and flip market. Knowing how ARV works will help you separate the wheat from the chaff when it comes to uncovering the best deals on fix and flip properties in your area. Knowing the ARV of a property can also help you avoid the most common pitfalls and get a better return on your investment.

The good news is that private money lenders understand these challenges and are ready to help you get the funding you need to buy that fix and flip property. Give us a call today and let us know more about your real estate investment goals. We’re a network of like-minded investors who want to help you succeed! Whether you need to finance a fix and flip property, a rental property, a multifamily investment and more, we have the knowledge and experience to help you take that next important step with confidence. Call us today at (818) 584-2424!

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