ARV rule of thumb?

[Craig Cerny]

Are there any formulas, rules, etc I can use to understand after repair value? E.g. if I spend 20k on improvements what will that do to my ARV? I image if I put 20k into a 500k property it wouldn't have as much impact as if I put 20k into a 100k property? Likewise I'm sure adding bedroom, sqft, etc has more impact than paint and flooring. I'm asking in regards to either SFH or SMF and long term rental, so I'm not considering snow cone makers.

[Chris Moton]

Craig, there are several ways to estimate value. You can look for sales comparables that would be similar to your property with the improvements complete and use that or an average of several. If you make improvements that allow you to increase your rents, another option is to apply a Gross Rent Multiplier to get an estimated market value. The GRM is market metric you select based on the market you are in and the property type, location in the market, condition, etc that you multiply by your gross rents to get to an estimate. You can do something similar with cap rates but in that case you would be estimating your expenses as well. In any case you need to know your market and what properties are selling for with regard to comparables and/or financial metrics.

Generally speaking, yes, adding bedrooms and square footage usually more impactful than just paint and flooring but not always and adding that stuff is much more permit intensive and expensive.