Keep Your Projected ARV On Target with an Oregon Hard Money Loan
You’re a real estate investor with house flipping know-how. You’ve done your research, have carefully followed the real estate market trends. And now you’ve found what could be the ideal investment property and are ready to purchase.
But do you have a clear idea of the property’s projected After Repair Value (ARV)? A solid grasp of the ARV of any rehab project is critical to a successful flip, especially for securing financing. It also helps you accurately gauge the potential return on your investment.
What is “After Repair Value?”
What, exactly, is After Repair Value? It’s the estimated value of a property after it has been fully renovated, an essential figure used by investors in fix-and-flip projects to calculate the spread between purchase amount and resale price.
Lenders typically determine maximum loan amounts in part on the ARV. Understanding the time and cost of property improvements helps you communicate clearly with your lender. This leads to more appropriate financing.
Note that it’s important to know the difference between ARV, “as is” (a property’s value in its current condition), and “market value” (the price at which a property will sell).
Here are five investment property ARV tips to get your investment project on track:
5 Tips to Determine Your ARV
- Property characteristics: Compare your prospective property to other recently sold homes in the area (“comps”) using online real estate sources like Zillow.com. Look at properties that are comparable in square footage, number of bedrooms, garage, and outdoor space for a sense of value.
- Know your whereabouts: Using real estate search platforms, find properties that are close to the same public resources and amenities (schools, shopping, transportation) as your potential flip purchase. Calculate the average cost per square foot of homes in the area.
- Compare & analyze: A Comparative Market Analysis can provide valuable information, including photos and characteristics, about property sales in the neighborhood of your intended house flip. Ask your realtor for a CMA copy to help determine your ARV.
- Talk to a broker: For a small fee, you can attain a Broker’s Price Opinion from a realtor not involved in your property transaction. Inform the realtor of property rehab plans; request both an ARV and “as is” summary be included in the BPO.
- Hire an appraiser: For a thorough review and report of your flip property’s “as is” and after repair values, you can invest in an appraiser. Note that you may end up paying for two – yours as well as the lender’s.
Savvy Oregon House Flippers Use Hard Money Loans
At Gregory M. Russell we’ve worked with Oregon real estate investors for over 30 years. As an experienced private money lender, we understand the demands of house flipping and what it takes to ensure ROI. Talk to our private lending team about how a hard money loan can make your house flip project a success. Call us today at 1-888-477-0444 or complete our loan request form. We look forward to partnering with you!