What is the After Repair Value in Real Estate Investing? 

One of the most commonly asked questions for anyone beginning their real estate investment journey is about after repair value (ARV).

In its most simple terms, this is the value that a property can realistically be expected to sell for after renovations and repairs have been carried out. It’s important to be able to accurately determine this for many reasons. This includes how much to pay for a property and the amount of money a financial institution will be prepared to lend.

Demystifying After Repair Value for Property Investors

• The definition of AVR
• How to calculate a realistic after repair value
• What if I’ve miscalculated the AVR?

The definition of AVR

AVR is a term used for fixer-upper properties. People who buy such properties with the intention of improving them are often called rehabbers, or house rehabbers. 

The AVR is the price that the house will be expected to sell for after the renovation and improvements have been completed. In short, the definition of AVR is:

“The estimated value of a property after renovation, not in its current condition”.

How to calculate a realistic after repair value

If you Google how to calculate AVR you’ll be returned with a whole load of complicated formulas. However, it’s relatively simple to do, despite the gazillions of so-called experts who seem keen to make it more difficult than it should be.

There are three key steps to working out an accurate ARV.

1. Get the average current selling price of similar properties: These should be in the same neighborhood, have the same number of bedrooms, bathrooms, and reception rooms, be of a similar square footage, be a similar plot size, of around the same age and build type, plus be in a similar internal and external condition.
2. Work out the price per square foot of these properties: Say you’ve taken the recent sale price of five similar properties. Divide each individual sale by the square footage of the house. Then, take the five values this gives you, add them together and divide by five. This gives you the average price per square foot of all of your examples.
3. Apply this to your property’s square footage: Simply multiply the square footage of your property by the average price that you’ve just determined.

The resulting number is the ARV for your property.

What if I’ve miscalculated the ARV?

While an ARV is, by nature, an estimate, you do need it to be realistic. Knowing this will determine how much you spend on the property in the first place (plus your lender will also use this to work out the level of funds they’ll be happy to lend).

However, don’t worry too much about being slightly off. An estimate is an estimate, after all. Plus, if you’re way out of the ballpark, the lender will be very quick to tell you. 

The best way to ensure that your ARV calculation is accurate is to:

• Compare multiple properties.
• Ensure that they’ve sold within the last 120 days.
• Are as close as possible to your potential property.
• Have been finished to a similar standard as you intend to restore your potential property.

Do that, and you’ll be right on track to get a wholly accurate ARV to present to your lender.

Contact BRRRR Loans Today for Great Value, Clear, and Fast Real Estate Investment Loans

Whether you’re looking for a BRRRR loan, a fix & flip loan, bridging loan, DSCR, or any other type of real estate investment loans, you need a lender that makes life simple. 

At BRRRR Loans, we pride ourselves on clarity, simplicity, and speed. We know from experience that successful real estate investors need an experienced lender who can get the ball rolling straight away. We offer some of the best closure time in the business, plus a wide range of options to suit all investment circumstances.

Don’t waste a single minute more.  Head to https://www.brrrr.com for more info and call our team today for the fastest route to your next (or first!) property investment.