How To Calculate After Repair Value | ARV 3 WAYS!

In today's video, I'm going to show you how to calculate after repair value. Coming up next. What is after repair value? The after repair value is what you can get for the property at the end of the day, after you've done your rehab and everything else that goes along with the project. This is what you're going to be able to sell it for. Very, very important number. If you don't know that number, you're going to end up dead in the water. Welcome back, everyone. Before we begin, do me a favor and hit that little like button so that I know that you're following along. Now let's jump on in. How do you calculate that? There are several different ways to do that. One, if you're a real estate agent, you can literally go on the Multiple Listing Service and you can calculate through that part of it. And figure out, okay, what's selling for in a particular area. You can draw a circle around it, then you can compare bedrooms, bathrooms, square footage. And again, if you're a real estate agent, it's very easy to do that. That's probably the most accurate. You can go through a program that real estate agents also have. It's called Realist. And Realist kind of does the same function as one of those big unnamed real estate conglomerates out there do. They pull the information from the Multiple Listing Service. They gather that information and then they do the same thing. They draw a circle around there and this is what's sold in that area. Obviously, dealing with a real estate agent, you're going to get the most correct information. Realists would be second. The other website that I want to introduce you to, as investors, you may not be a real estate agent, It's called Pellego, www.pellego.com. Pellego is in Washington, is in California, and is currently in Florida as well. So we're dealing here in California. Pellego is a great website for the novice or experienced investors to go on. You literally put the address in there, it finds that particular address. One of the first little boxes or columns is the comps, the comparables. That's what we're looking for. That's what's the after repair value. You go through those comps to make sure that again you're comparing apples and apples. You don't want to compare a 2-bedroom with a 4-bedroom house because again you're going to end up possibly paying too much or too little at the end of the day and you're going to lose out on a deal. The next little area it goes into is a rehab and it Kind of tells you, gives you what a rehab is, a maintenance rehab, and it goes all the way up to a very extensive rehab. And it gives you a dollar amount and it's up to you to figure out, okay, what dollar amount am I going to put on there? I personally do 10% of the after repair value. Okay. That's the number that I use when I do my calculations. The next little tab that you're going to go into is putting all those numbers together. You're going to put down there what the purchase prices. It's already established the after repair value. You've put in the rehab. It's going to say these are closing costs, so seller commissions, buyer commissions, escrow commissions, title commissions, all that is in there for you. And then the bottom line, which is what you're looking for, is how much of a profit am I going to make at the end of the day on this deal? Now once you've determined that, Which I call the maximum allowable offer on a property, then you can adjust that. So you want to pay less, which means your profit goes up, or if you want to be competitive, then you're going to pay more. Okay, your profit goes down. If you go out and take a look at the property and you've established that the rehab is $50,000, you get out there and you go, well, I just need to put carpet and paint. That brings it down to 10 grand. Okay, you're going to make another $40,000 on that deal. Vice versa, if you went out there and your budget was $50,000 and now you look and you have to repair the roof, you have to do plumbing, you have to do electrical, you have to do way more than normal, you may be spending $90,000 to $100,000 on that deal. So there goes the profit the other way at that point. So these calculations, the after repair value, rehab, all that stuff, these calculations are for you to determine whether you're going to get off your butt and go out there and look at this property. If they don't work out, if they're not within the range that's acceptable to you as a profit, why waste your time going out there? Okay, I get probably 10 to 15 deals sent to me a day, and if I were literally to go out and look at these properties, that's all I do every day. So I evaluate them just like I've explained to you, and The good ones I go out and take a look at, obviously the next day. So that's what you need to do. I want you to remember that the ARV is just a snapshot in time of the value of that property at that moment. It literally changes on a daily basis. For example, we just did a flip that we bought at a great price Thought that the ARV was here, which it was at the time, but the market is just literally going crazy right now. It just, it just shot up. So you do your calculations when you purchase the property, and then right before you put it on the market, which may be 2 or 3 months later, you're going to do those same ARV calculations again to determine whether that price has gone up or down. Remember, if you're flipping for a business, you want to put it on the market either at the market value or a little bit below and just let the market forces take care of it after that. You want to be in and out as quick as possible. You don't want to value it so high that nobody's going to come over and take a look at it. So if you want some information, take a look right up here at that flip that I'm talking about. If you have any questions, feel free to reach out at any time. And for all of you who have been reaching out, I appreciate it and I answer all your questions.