Understanding ARV and Calculating Your Offer Price
about 30 days ago.
Updated about 30 days ago.
On this podcast episode I talk about how to calculate the After Repair Value (ARV), so that you can know how much to offer on a property.
Most new investors, and a fair amount of seasoned investors make the mistake of using common tools like Zillow, the MLS, and the Property Appraiser Website to estimate what a house is worth.
On this podcast I talk about why that is a mistake and how that mistake can cost you a lot of deals (and a lot of money). I use as an example, a house that I just purchased last week from a wholesaler. I paid $105,000 for this house and the wholesaler purchased it for $90,000.
According to most online estimates on sites like Redfin, Zillow, Movoto and Trulia the house is worth around $125,000. However the real ARV on this house is probably more like $165,000. I explain to you in detail how I came up with that number by showing you how I use the MLS to see what is for sale right now and how a first time home buyer with an FHA mortgage thinks.
Using the wrong tools, or not having complete access to tools like a good comparable sales report (which is not free) can create a situation where you rely on sites like Zillow, the property appraiser and the MLS for comps and to estimate ARV. While that may work (more or less) sometimes - it won't work all the time.
Those sites can, and will, throw you astray. You will not always get accurate numbers if you use these sites to estimate ARV. Having access to the MLS, and a good comparable sales report (we use Title Pro), plus doing the work in understanding your market, what sold, and what is listed for sale, can be the difference between being way off, or spot on when it comes to estimating the ARV.
This is one of the most important (and overlooked) topics for new investors. And that is one of the main reasons that I focus on it so much in our training's. Knowing how to make money out of deals that other people pass on is my specialty. I buy awsome deals every day from wholesalers that other investors pass on. And you want to know why? Because they are not dialed into the ARV. If you learn how to really know your comps, your market, and your ARV's, then you will see how you will make a lot more money as a real estate investor.
If you are brand new to real estate and want to learn more about how to wholesale real estate and flip houses then please register for the free wholesaling real estate training at this link below:
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