How accurate do you think your ARV's are?

[Eric M.]

Typically, by the time my flips are on the market, I am completely over it and ready to move on to whatever is next, so I never did much retrospective analysis. I know how much I made and generally what went wrong and right, but not much other number crunching the way I do with my other businesses.

Recently, I went back over several years and did a deep dive analysis of my flips, flips I have just invested in and other ones I have been involved with. 

One thing kind of surprised me.

Basically, if you had asked me (going into the flip) my confidence level on a scale of 1-10 in the accuracy of my rehab cost and ARV, it generally would have been 6-7 for rehab cost and 9 in my ARV. I tend go in very uncertain if I have rehab costs right and wondering what might go wrong, but pretty certain I have ARV close. The reality was the opposite.

I was really accurate with my rehab costs despite the things that go wrong, but not as accurate as I expected with my ARV. In other words, my risk wasn't where I thought it was.

Which one do you think you are more accurate on and how accurate do you think it is reasonable for ARV to be on a mid-level, 6 month close-to-close flip. It may be that my expectations for how accurate I should be is unreasonable, but accurate ARV's have to be one of the keys to these iBuyer flippers that we have to compete with. Since I have recently gotten access to more data with my RE license, I have gotten kind of obsessive about fine tuning my ARV's lately. I live here AND I have the data, I should be able to be more accurate than the iBuyers.

Adjusting for changes you make along the way to your rehab plan, do you think you can be accurate to within a 5% window (10K window on a 200K house)...a 10% window?...more?  Over a 6 month period.

[Dan H.]

My ARV values are spot on but the refi appraisals are not. In my market the refi appraisals always use the low range of the comps while the purchase appraisals use comps that justify the agreed upon price which is typically not the low range of comps.

One of my last two refi appraisals I appealed and got a $60K increase. Even with the $60K increase the refi appraisal was below what I could have sold the RE for.

I factor these low refinance appraisals into my calculations so typically the refinance comes in close to what I am expecting. The other of the last 2 refi appraisals (not the one I got a $60K increase) was almost as bad as the one that I got the $60K increase (and by the same appraiser). I went to appeal and the appraiser had disappeared (literally his employer claimed to not know where he was). I was given a choice of starting process over or going with the poor appraisal. I went with the poor appraisal but believe the process was f***** up. I should not have had to leave money in the RE because the appraiser went AWOL (my view is that he was so incompetent and it was getting obvious that he left the area to start a new elsewhere).

My rehab estimates are not as spot on. I have learned to add an unexpected item factor but the issue is that the range of the unexpected factor varies from rehab to rehab. So if I have a rehab cost of $30K for know items, I will budget ~$40K due to the realization that we often encounter unexpected items. The issue is that sometimes the unexpected items are only a few thousand and other times they have been ~$25K (bad foundation with bad sill plates through the entire house). So I have had rehabs significantly over budget and unfortunately other rehabs only slight under budget.