Best Ways to try and Calculate ARV

[Anthony Venezia]

Hello! I write this as a newbie who has just 1 rental so far. As I've been analyzing more deals lately to look for my 2nd deal, I've consistently had the toughest time estimating ARV.

I do have comps pulled for me to give me the best idea possible, but sometimes the comps fall within a 20-50k range depending on varying factors. I understand a range that wide can make the deal riskier with just not knowing where the ARV could really fall.

With that said, I’ve recently been using all the relevant comps (about 4-8 comps) to get an average price per square foot. I will then multiply that average by the price/sq ft in the subject property. I’m curious to get others thoughts on this method and any potential downfalls I could be missing. Also any other strategies to use that could be more accurate. Thanks for your time!

[Doug Crenshaw]

Hello @Anthony 

@Anthony Venezia !

The ARV is probably one of the most important numbers you need. Without it, it is like you are trying to cook dinner without food. The number of comps you use are less important as their relevancy to the subject property. You said the you have comps pulled for you... From a Realtor? Or from Zillow or another +/- 20% calculator program? If you are using comps from a Realtor us the MEDIAN Price and not the AVERAGE Price per square foot. By using the MEDIAN you are smack dab in the middle of the pile so, if you have 13 properties there are 6 above the Median and 6 below. The Average of those same 13 might be skewed one way or the other depending on the prices in the area. The Median is a more consistent number to work with I have found in almost 20 years in the investing world. When I run numbers for my investors I also give the high and low range just so they can have a feel of the area.

As a general rule of thumb the comps you pull should be within 1 mile of subject property, sales within max 90 days, within 1,000sf, and the same type of construction. So don't try to compare a 3000sf house with a 800sf condo that sold 7 months prior 12 miles away for $500K. Of course the criteria may be different in your area, and that is where a good Investor friendly Realtor would come into play. At that point if you are looking for a range go +/- 5% on each side of what you have calculated. At least then you won't be $20-$50K off on your valuation of the property!

Hope that helps!