Foreclosed and distressed homes frequently have significant repair issues. They can also be plagued with “functional obsolescence,” floor plans or other factors that do not fit current lifestyles and should be corrected or value and resale will be impacted negatively. However, in most cases it is things like painting, new windows, energy efficiency modifications, flooring replacement, new roofing and other major repairs that are necessary.
Real estate investors could be in the market for a flip property. The investor may want to buy the distressed home, make the repairs and sell it to another investor or even a retail buyer. Other investors could be searching for a good rental unit and they’re willing to undertake repair and remodel to get the home they want at a final cost that will generate a great cash flow from rents. Even a wholesale investor will need to understand ARV, as they’ll be flipping the home “as-is” to another investor and must be able to estimate the costs of repairs the other investor will incur.
There are many online resources for estimation of remodel and repair, but building out an investment team that includes repair people and contractors is a better way to get more accurate estimates for the local area and the current market conditions. As the investor works with these sub-contractors, they will learn enough to do their own estimates in many cases later.
The whole idea of distressed and foreclosed property investment is to cut as steep a discount to real value as possible. The investor is trying to buy far below the value of the property in the current market, but which value are we talking about? There’s the as-is value for a flip to another investor, and there’s the ARV, which is the value for ultimate disposition for a livable residence.
It’s critical for the real estate investor to acquire team members and as much knowledge as possible to achieve accurate repair estimates for the ARV of the property.Doug Clark
Foreclosed and distressed homes frequently have significant repair issues. They can also be plagued with “functional obsolescence,” floor plans or other factors that do not fit current lifestyles and should be corrected or value and resale will be impacted negatively. However, in most cases it is things like painting, new windows, energy efficiency modifications, flooring replacement, new roofing and other major repairs that are necessary.
Real estate investors could be in the market for a flip property. The investor may want to buy the distressed home, make the repairs and sell it to another investor or even a retail buyer. Other investors could be searching for a good rental unit and they’re willing to undertake repair and remodel to get the home they want at a final cost that will generate a great cash flow from rents. Even a wholesale investor will need to understand ARV, as they’ll be flipping the home “as-is” to another investor and must be able to estimate the costs of repairs the other investor will incur.
There are many online resources for estimation of remodel and repair, but building out an investment team that includes repair people and contractors is a better way to get more accurate estimates for the local area and the current market conditions. As the investor works with these sub-contractors, they will learn enough to do their own estimates in many cases later.
The whole idea of distressed and foreclosed property investment is to cut as steep a discount to real value as possible. The investor is trying to buy far below the value of the property in the current market, but which value are we talking about? There’s the as-is value for a flip to another investor, and there’s the ARV, which is the value for ultimate disposition for a livable residence.
It’s critical for the real estate investor to acquire team members and as much knowledge as possible to achieve accurate repair estimates for the ARV of the property.Doug Clark