Determining the after repaired value (ARV) of a property is probably the most important skill an investor can have! We analyze over 100 properties a week and being able to quickly determine what they are worth saves us hours of time. If a property is way overpriced we don’t waste our time pursuing the property and if it is under priced we drop everything and attack it.
But this skill is what sets the pros apart from the Joes. If you have 10 properties for sale in one area, how quickly do you think you could determine the value of a property in the same area? Usually within minutes, you don’t need to pull the comps, because you know the comps and what buyer’s want.
When trying to determine the value you need to keep a couple things in mind.
Don’t be overly optimistic!
This is the quickest way you can lose money… if you screw up on the ARV value you are behind the game before it even started.
Don’t be too conservative!
Just as important, you cannot be too conservative or you will never buy anything. A lot of people want try to be super conservative and this can stop them from every buying anything. The comps are the comps.
Watch the Small Things.
Your job is to be a detective. People often forget about the small things. Are you comparing a 10,000 sq ft lot to a 3,500 sq ft lot (you shouldn’t be). Are you comparing a 1950’s built house to a 1990’s built house. There are a lot of other subtle things too – comparing a single story to a 2-story. You can break these rules, but you should know you’re breaking the rule and factor that into your math.
Ask an Expert.
I have valued hundreds of properties, but I still run into weird situations and it’s the perfect time to call in the help of my friends who do appraisals.