How to Accurately Calculate ARV ??

[Blake Murdock]

Hi All - new investor here! Currently stuck in analysis paralysis trying to find my first deal. I live in AZ but am looking out of state for less expensive properties. The part I am struggling with is calculating an accurate ARV when running my numbers! This seems like kind of a weird time to evaluate comps because everything was selling for much more in the last 6 months. How do you compensate for this? Also, what if there are no renovated comparable houses in close proximity? A lot of houses in the Midwest are under $100k and look like great reno candidates, but I'm stuck wondering how much a renovated property would sell for in those areas! Any suggestions or tips? I suppose I need to start creating a local team to help me out. Thank you!

[Megan Foucher]

Keep in mind that you should aim for like/kind renovations. Once you flip and try to sell your property, buyers will be doing the same thing that you are doing right now- trying to figure out what to offer based on comps. If you over-renovate you may not get that value back in a sale because there is nothing to compare it to. If you are going to invest out of state in a market that you are unfamiliar with, I would target an area with a comps that show investor-grade/high level renovations. These types of comps will show you what you can expect to get for your property at the top of the market. You can use this as your ARV and make your property look like that one. Alternatively, look at hot areas that are trending up in value. i.e Katy, Texas where the school are highly rated. Then you can be more confident in your investment because you know that it's a highly sought after area.

To answer your first question, use comps within the last 6 months. The market is shifting but its not going to shift that fast. If you are planning to buy now, use the last 6 months worth of comps and that will give you a good sense of where you should aim for with your ARV. Good luck!