Calculating 65-70% ARV

Determine After Repair Value (ARV) by using reliable comps and taking the average value per sq.ft. multiplied by the sq. footage of your property. To determine 70% of ARV, multipy ATV by .7, For 65% multiply by .65. To determine what per centage a list price is of ARV, divide list price by ARV and multiply by 100.

Example

average comp value is $115/sq.ft.
home is 1500 sq.ft.
ARV=$115x1500 or $172,500.00

70% of ARV is $172,500x.7=$120,750

if list price is $150,000
list price is 150,000/172,500=.8696
.8696x100=86.96% of ARV

I hope this answers your question.

Good Luck, Al

Thanks for responding. I am still a little confused. The 172,000 is the ARV ok, but what did you do in the second part of the problem with the list price divided by the ARV equaling 86.96 % of ARV ?

That made my head spin Al. I'm not a numbers person, so I look at the comps so I know the ARV. I look at the repairs needed if any, factor that amount in and if the price is still $50k or more below that I know it's a pretty good margin to work with. I keep it simple, since I HATE math.... LOL! But that doesn't mean if it's over the 70% it's not doable, you just need to have buyers other than investors lined up for those. Investors aren't the only ones you should target. Think a little differently and you'll make money either way.

If the list price was $150,000, than the list price is 86.96% of the ARV (list divided by ARP multiplied by 100). If you need to be at 70% of ARV, you would need to offer no more than $120,400 (ARV multiplied by .7). If your lender would only go to 65% of ARV, than you would need to offer no more than $111,800 (ARV multiplied by .65). I hope that makes it more understandable.

Al

good explaination...

crystal.

When looking for deals don't focus on the list price. The main number to look at is the ARV or FMV (future market value) and the comps for that property. If the property needs to be 65%-70% off that is off the FMV don't worry about the list price.

WOW!
Whole new perspective!
No wonder you are a coach!

I am making an offer on a property in need of major upgade/repair/clean up in a highly desirable neighborhood in a area with $mega properties. Really tough to figure out when not much is selling of course

FMV - FUTURE MARKET VALUE! Love it! Such a help! Makes all the difference!

Thank You!

Angela

Ouch !!

You have to be careful when you determine your ARV/FMV by multiplying the price per square foot of the comps. It really depends how good the comps are - remember that as the size of the home goes up, there is diminishing value on price per square foot. That is, if you had 2 "identical" houses in the same neighborhood, and one was 1000 sq ft and the other 2000 sq ft, the larger would not be worth double the smaller. So, when you look at comps, be sure the sizes of the homes are all within about 10% of each other.

Gena I agree. The way I always do it is check the comps,figure what my property would retail for x 65% - repair cost - my profit share = my purchase price.

150,000 Quick sale price
x65%
_______
97,500
-20,000 Repair cost
_______
77,500
-20,000 My profit
_______
57,500 My top purchase price if I get it cheaper better for me.

Why 65% that seens to be to low in my area please help whats that best way to know what percentge to times the arv for ?

The best way to determine what you need to purchase at is to build your buyers list. You don't know what they want until you ask them! Some might want 70%-repairs, others may take a deal as long as they can profit 15% of the ARV!

To add to this, if there are agents involved oyu have to factor their commission in, as well as the closing costs.

Everyone looks at math differently.

Keep it simple. Whatever the ARV is subtract 30 or 35%. Every basic calculator has a button on it that looks like this " % ".

That simple.