When we talk about real estate investing the purchased property requires rehabilitation in some way because of the flipping factor in buying and selling. You should know how to calculate (After Repair Value) if you are in business of real estate. The knowledge of calculating After Repair Value is essential because only that you will be able to take best decision regarding investing or flipping the property. After Repair Value is property’s value after repair. Your property’s actual worth after repairing is ARV. When you want to renovate your building and the expenses incurred on it that price is Repair Value. After fixing the building damages the rest value your building is giving you that is worthful. Experienced real estate investors know to bring back your homes in adequate condition and what should expense out according to area. What renovations bring into homes according to the price and area. Experienced real estate investors are fully confident about fixing amount and After Repair Value of the building.
How to calculate After Repair Value?
If you are new in real estate business even then you can calculate your property’s After Repair Value. It is not complex thing to do. An easy formula can be used by anyone.
Current value of property + Renovation Value = After Repair Value
Figuring out the values of these two factors can be little tricky. For calculating the actual value, you must know the current value of property and renovation value. If we talk about the current value of the property, everyone always goes with the purchase price of the property. Buying the property at a deep discount is required on the front end.It is just as feeling confident that you will have a buyer at the price you need for profit is on the back end.
In between discount and profit, those two ends there is a fixing stage that is essential to calculate. This is the point where the profit gets at peak. Here the risks are also higher. Usually, fixing a property is just like repair and cosmetic but the amount may vary and it seems like remodeling and extensive rehab amount.
Maximizing the amount after Fix-Up
It is tricky to estimate the correct cost after renovation. You want most value out of your renovation. To find out profit or lost which one is made you have to follow these steps:
- Buy the material at discount and estimate it rightly. You have to do some homework for buying right material at discount. Visit rehab stores and liquidators for material not only big box homes.
- Try to know all the capabilities of your contractor. You need to supervise your contractor full time. You need to check the quality work and it will be done in appropriate time and budget. Do not exceed from your budget.
- Budget is always based on your buyer. If you are going to be selling in the commercial market keep the materials in the acceptable range. If you are selling in the consumer retail market finishes it up with buyer demand and want.
Always remember you are in competition with other local area’s property. Make your property competitive. This is the final touch of your property’s After Repair Value. The new look and renovation make your property worthful and competitive with other property. You can go with Comparative Market Analysis when all the work is completed at your home. This is the survey usually novices do to check the rise and shine of their property. It shows how competitive your property is with other buildings and how much you are better than others or what the loopholes you left.
The Fundamental Factor.
The winning points to fix & flip or fix-to-rent real estate investors must address carefully:
- Are you capable of doing the repair work of the property?
- Are you able to locate and properly supervise contractors in getting the work done?
- Have you accurately estimated the cost of all repair work?
- Can you get an accurate After Repair Value of the property?
If you did these things accurately then you can make yourself a profit.