Factors to Consider when Calculating ARV for a Fix and Flip
Real estate investing is a common practice in Washington, DC, where an estimated 50,528 home sales occurred in 2015. One of the most common ways to invest in DC real estate is to purchase homes that are in need of rehabilitation. Whether it is through extensive repairs or a simple bathroom remodel or two, all investors know that they must calculate the anticipated After Repair Value (ARV) before they embark on a house flipping journey.
ARV refers to the value of the home after all of the repairs have been completed. This does not mean that completing a $100K renovation in a newly purchased home will automatically result in an additional $100K in equity. This is one of the reasons that real estate investors calculate the anticipated ARV before they purchase an investment property.
There are several factors to consider when calculating the anticipated ARV of a home.
The good news is that if you are detailed oriented, work with a trusted team of real estate professionals, and intimately understand the local market, you can successfully calculate the home's ARV to maximize profits.
Where To Flip In The District
For example, throughout 2015 and 2016, investors could often purchase a row house that was in need of extensive renovations for around $500,000. The homes could then be converted into condos and sold for up to $850,000 per unit (or more, depending, of course, on location, quality of renovation, layout, amenities, and so forth). The moral of the story for D.C. is clear. By successfully calculating ARV, investors can make informed decisions regarding the purchase of properties in up-and-coming neighborhoods.
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ABOUT THE AUTHOR
We specialize in funding rehab or fix and flip loans for acquisition and renovation of investment properties in Washington, DC, Maryland, and Virginia.