How to nail the ARV?

[Douglas Goldstein]

I'm determined to do a BRRRR but have some questions about the process:

1. In order to get the ARV just right, should I have it appraised by an appraiser who walks through with a contractor? So that they would, together, agree on what needs to be done to get it to a certain value?

2. For that matter, can you ask any appraiser to give a current value and the ARV? Or do appraisers not even do that?

3. How do you make an offer without being able to do that independent appraisal first?  Or is the offer a best guess, and if the appraisals don't match you walk away?

4. I intend to not use my own money for this, instead to get a loan from a hard money lender. And when all the rehab is done, get a conventional loan to pay the HML back. Is this a red flag? HMLs seem to charge hefty fees -- do those fees make that plan difficult?

Any thoughts for this here newbie would be appreciated!

[JD Martin]

Well, technically you could do all of those things you were proposing. But being able to figure out the market yourself is paramount to not losing money in this business. If you study the houses that sell, their features, condition, location, size, etc, in short order you should start to get a pretty good idea what things should sell for. That's the only way you'll recognize a deal - by the time you do the things you're talking about, someone like me has already bought the house and you're left with a meaningless appraisal that cost you $750. But, to answer your questions in order:

1. I wouldn't do this. See my answer above. If you need real help on the repair costs, a decent GC will usually give you those (ballpark) without charge. 

2. Yes, you can ask an appraiser to do that. That's what they do.

3. You get really good at knowing what the market is in your area and how much stuff costs.

4. Difficult but not impossible. It all depends on your buy. If you buy something for 50k and put 50k in and it's worth 200k when you're done you're going to make money whether you used HM or your own cash.