To become a successful real estate investor, the one skill you need to master is estimating the after-repair value of a property. To turn a good profit off an investment, regardless of whether you’re a house flipper or holder, estimating the right value for your property is crucial. While everyone’s goal is to buy cheap and sell at a higher price, estimating the value of a property correctly, and in this case, the after-repair value, is key in turning low-ball investments into moneymakers. Today, we’ll be looking at simple ways to estimate the value of a single-family house or residential property. Let’s get into it.
Why You Should Correctly Estimate the ARV of a Property by Yourself
It’s easy to hire some appraisers or real estate agents to estimate the after-repair value of a property for you. But the associated expenses quickly add up as you go around looking at dozens of properties per day. Moreover, there’s no saying when a good deal will pop up, and so, waiting on an appraiser or real estate agent is simply impractical when you want to become a successful real estate investor.
In addition to being cost-ineffective, it’s not the wisest decision to completely reply to an external party when estimating the value of a property. Therefore, before you seek consultation with a real estate agent or appraiser, you should do your due diligence and do a rough evaluation of the property on your own.
Simple Ways to Estimate the After-Repair Value of a Property
The simplest way to do this is by comparing against other properties in the market. That is, you need to gather information on the property you are interested in and similar properties which have been sold in the market recently.
Getting the Important Details of Your Objective Property
Here, you should be concerned about the location of a property, neighborhood, size, and indoor amenities. From there you can proceed to gather more information about property values in the location with similar facilities and draw up a rough value for the property.
Finding the Right Comparable Property
For the next step, you need to find the right comparable properties. That is, find other properties which have similar characteristics to the one you want to purchase and find out how much they sold for. If you find the right comparable properties which have been sold in the market in the past 3 to 6 months, you can draw up an accurate estimate for our objective property. Metrics to consider here include:
- Address of the comparable property
- Asking price and selling price
- Number of bedrooms, and bathrooms
- Size and area of the property
- Date of sale
- The market condition during the time of sale
Finally, compare your objective property with the comparable and you should be able to get a good estimate for the ARV of your next investment.
Using these metrics, you can get a rough evaluation of your ARV, and once you settle on the best investment, it’s best to consult a real estate agent or appraiser to get a more accurate estimate. For subsequent investments, you should be able to make better estimates and no longer need to rely on an appraiser. Therefore, you’ll be making smarter investments and getting more for your money.0