Real estate investing for rehabbing requires that you master a critical skill: determining the ARV, or the After-RepairValue, of a property. This number determines what purchase price you should offer`the seller to lock in your profit.

You can research the ARV before you know the contractor’s estimate, or your purchase price.Look outwardly at the market, and let comparables guide you toward the ARV.With the ARV in hand you will know how much this deal will earn after all the costs are paid out – rehab costs, selling costs, and all carrying costs.

Wholesalers especially must be able to support the ARV to their target buyer – the real estate investor who will do the rehab. The investor wants to know the cost coverage and the profit from this prospect.

Find comparables from recent sales of properties…

• of a similar description,
• geographically nearby, or better yet in the same neighborhood, and
• move-in ready .

Focus on properties sold in good to excellent condition, because that’s the same condition that the project property will be in when it goes on the market after the rehab.

Or, take into account factors that affected the selling price – perhaps the condition wasn’t perfect, or the property backs a busy road … whatever it is, estimate the effect on the price for a more accurate comparable.

Your purchase from the seller must be at a steep discount from the ARV. You must allow for the rehab costs, carrying costs, selling costs … and a healthy profit for both yourself and the investor(s).

Real estate investing is a numbers game, and those who do it well know the numbers for each project before they buy in. Successful investors don’t buy properties hoping for the best.Instead, they have done the research and already know the ARV – that is, the target selling price to the home buyer – and a firm estimate of all the costs, before deciding what they will offer to purchase the property.

When all is said and done, the final sale to the home buyer should come in close to the estimated ARV, or above.

Assessing comparables to determine the ARV is a process involving solid research, not guessing or intuition.Follow these steps and assess the comparables properly, and you’ll have a good handle on an ARV that will tell you if this project is worthwhile.

Question or Prompt for Response – open ended, relevant

Where do you look for comparables when you want to know the market value of a property?

Request a FREE one-on-one Investor Aptitude Assessment with an experienced, real-world real estate investor.  Visit http://www.streetwisepropertyinvesting.com/coaching/