Calculating After Repair Value

[DeMarris Manns]

First, I'd like to say hello to everyone here at BP. I'm a wholesaler here in Memphis. This is an AMAZING forum, and I'm glad to be associated with it.

I don't want people to think I'm lazy and didn't search this topic before posting, because I did. I just didn't really get a clear answer from the previous threads. I've developed a relationship with a real estate agent and get comps from the MLS here in Memphis. So my with that being said here's my question:

Once I have my comps, how am I getting ARV from them? I watched a webinar that said take the average of 3-5 comps and that gives you the ARV. I've watched others that say take the 3 lowest and average. Others say take the three highest. So once I have the comps from the MLS, whats next?????

[Trey Oliver]

The way I was taught is to average all the RETAIL sales to get the ARV. Look at the sale info to determine if it's a retail sale or a cash sale to an investor. The retail sales will usually be the higher prices and will mention a loan used to buy the property. The investor sales usually are lower and purchased cash. Once you have your retail sales, have looked them up to make sure they actually compare, and make sure they are within .5 miles of the subject property(this one is especially important here in Memphis), just average them out and there's your ARV.

With all that said, I have found that here in Memphis the ARV is not as useful as people make it out to be. First reason being, most buyers in this market are buy and hold investors and could care less about the market value as they will be renting. Cash on cash return is what will interest most of them. Secondly, ARV and how to figure it out is different from investor to investor. The amount and quality of repairs an investor is willing to do varies as well. A lot of buyers I have dealt with look at it as an imaginary number and simply go by the current market values for the area to do their calculations. Things have gone easier for me when I just go by the current market value and use that number in my calculations instead of trying to figure out what the house MIGHT be worth IF certain repairs are done.

DISCLAIMER: I still consider myself a newbie and have a lot more to learn. Don't take what I'm saying as the gospel here....just sharing what I've learned from my experiences so far.