How To Do A Quick ARV Analysis
How to analyze a property’s after repair value (ARV) is an important ability that all real estate investors (REI's) need to know how to do. REI's who quickly analyze a property's ARV are able to look through and find more potential investment properties. Once you find a house that looks like it has potential you can decide if you should take a deeper look at it to see if it’s the right investment property for you. The more properties you analyze, the more deals you’ll find and the more money you’ll make.
Info About Subject Property
You will first need to gather information about the house you are analyzing. You will need the following.
If the house is listed, this type of info can be found on the MLS info sheet. You can request one of these documents from a buyer’s agent. If you don’t have an agent or some info is missing from the documents they provided, you can use sites like Zillow.com, Realtor.com, Google or your local tax assessor. Sites like Zillow aren’t as detailed as the MLS, but it can often do the job just fine for rough estimates.
After you have all the info about the house that you’re analyzing, it’s time to look for comparable properties (comps) that have been recently sold.
The most accurate source of this info is going to be on the MLS. If you have an agent or appraiser, you can ask them to find comps related to the criteria you have selected. If not, you can find this info on sites like Zillow.com and Realtor.com, etc. Just know that they will not be as accurate, up to date, or have as much details as the MLS. But it’s a good source to quickly find info for a rough estimate.
You will need to find the following info.
|Filters to Find Comps |
Something we think all investors should do is to go see the house in person and get a better feel for the area. This way you know what the buyer feels when they see the home. At times the MLS and database sites like Zillow fail to include details that you may find in person. This could mean less competition, making it easier to buy if you act quickly.
If you’re unable to see the house in person, use Google Maps Street View in order to get a good view of the house and area. Just remember that these images are likely old and out of date. Also, utilize the photos on the MLS, Zillow, Realtor, etc. to get a more detailed look of the property.
If you look at the properties in person remember to take some notes. While you’re there ask yourself if the house looks better or worse than the subject property, make sure you write down why. What are the few that are most similar to the subject property? This information will be useful when you start comparing comps.
Keep in mind that this is a rough estimate. A more detailed comparison would need more info. But for now, the only info we need is the square feet, bedrooms, bathrooms, condition, and the price it sold for. This allows us to run comps very fast to see if the house is worth taking a more detailed look at.
Once you have this information write it down in a chart like the one shown below.
|Property||Square Feet||Bedrooms||Bathrooms||Condition||Price Sold|
|Subject Property||1200||3||2||Very Good||$125-$135k|
|House 1||1150||3||1||Very Good||$120,000|
|House 3||1400||4||2||Very Good||$145,000|
You must look at which comps are better or worse than your property, and what makes them different.
You can see how these houses are different compared to the subject property.
- “House 1” had one less bathroom, 50 square feet less and sold for $120k (Worse than Subject Property.)
- “House 2” had 100 square feet more, but it was in poor condition and sold for $110k (Worse than Subject Property.)
- “House 3” had 200 more square feet, 1 more bedroom and sold for $145k (Better than Subject Property.)
Based on this info we could say that the property would likely sell for $125k-$135k. Keep in mind that this is made to be simple. By doing this you should be able to find the rough value for your property based off comps. If it seems like good a deal you can dive into a deeper analysis to see if you should invest.
Remember that this is how to get a rough ARV estimate. Doing quick ARV’s allow you to look at more properties quickly and see if it’s worth taking a deeper analysis. It is OK if the property info you get isn’t 100% accurate, work with what you can find. It may take you a while to find the ARV at first, but the more you practice the faster you will get and the more helpful it will become.
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