How do you determine the ARV of a property?

[Lawana Anderson]

Does this happen after you see the property? Do I need to hire a Appraiser or build a friendship with a General Contractor? Which one is least cost effective? Or if I have general knowledge, gestimate?

[Chris Piper]

@Lawana Anderson it depends on how you want to do it. I would definitely NOT use an appraiser. That will get expensive and will probably take too long causing you to lose out on some deals. A contractor will not be able to help you determine the ARV. You determine that by having a real estate agent pull comps for you, and by having them put together a CMA(comparative market analysis). They will do this for you for free. One VERY important thing is to make sure you already have a cash buyer's list, make sure you know exactly what kind of properties they want, and what they are willing to pay for them. This way, you already know which properties to look for. Only look for properties that your cash buyers want to buy. Don't buy anything just because it's a good deal or because it's cheap. If you do, you will be trying to sell it, without having anyone in advance who wants it, and might not be able to close on it.

Once you know what the ARV is, then you can run numbers to see if it's a good deal for you. So, here is the process:

1. Locate properties by: driving for dollars, mls searches from your agent, bandit signs, buy lists, advertising on craigslist, etc.

2. Look at pictures or have your agent take you to see the properties. You can determine the cost of repairs by either looking at pictures and ballparking it, physically looking at it and ballparking it, or have contractors meet you at the property when you go look at it. They will give you a free estimate. Always get at least 2-3 contractors to give you estimates. You can have all 3 meet you at the house at the same time if you want. This way they know there is competition and will try to give you the best price.

3. Run your numbers:

ARV X 70% - Repairs= Your Sell Price

ARV X 70% - Repairs - Your Profit - Other Fees or Costs(closing costs, interest on funding, etc.)= Max Purchase Price

4. Make offers

5. Get properties under contract

6. Market to cash buyer's list, online, and anywhere else you can.

7. Get a cash buyer to put the house under contract with you

8. Close on your scheduled closing date - double close(if wholesaling)

9. Get paid