What is AVR and how to determine AVR(After Repair Value) of a property?
After Repair Value (ARV) is essential to a successful and profitable property buy or sale decisions most for real estate flippers.
AVR is the value of a property after you have performed repairs and made property in a good state that is ready for the market. It takes into account the total cost of repairs and the estimated value of the home.
Learning how to accurately determine the after-repair value is a neglected skill. If you are looking to purchase, repair, and sell properties on a given timeline, then this skill is even more imperative to your success.
Before you determine AVR, you should know the repair cost. To evaluate the repair cost you should gather all of the structural information on the house you are interested in repairing, like
Condition of the property (upgrades, finishes, features, etc.)
Age of the property (ideally no more than five- to 10-year difference in age)
Size of the property (square footage)
Construction and style of property (Craftsman, wood frame, brick, etc)
Location (typically within one mile or less, but ideally in the same neighbourhood or subdivision)
you can use this simple formula that includes ARV and repair costs to prevent loss of money
MAXIMUM PROPERTY PRICE = (ARV x 65% TO 75%) – Estimated Repair Costs (OR)
Purchase Price + Value of Repairs and Improvements = After Repair Value (ARV)
If you use any of the above formulae for ARV and take all the previously discussed factors into account, then you should have a profitable experience.
For ARV calculations seeking assistance from other renovation experts and getting a second opinion will be worth the extra money to prevent costly miscalculations and make a right decision with your ability to profit off of from the intended property.