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How to Determine Your Lakeland Property’s After-Repair Value

Tiny houses placed on stacks of coins representing increase in valueIf you’re ready to start working as a single-family rental home investor in Lakeland, among the most significant terms you first need to know is After Repair Value (ARV). The after-repair value of a property refers to the value of a property that has been fixed up or renovated. To be more exact, ARV refers to the estimated future value of the property, consisting of all the repairs and improvements. To ascertain your property’s ARV For it to be utilized right, you should first know how to calculate it accurately. Keep reading to learn how to do so.

Start With a Market Analysis

A competitive market analysis is one of the greatest ways to calculate your property’s ARV. By checking out comparable properties (comps) that have recently sold, you may acquire a great insight into your property’s new market value. Countless investors begin by searching the multiple listing service (MLS) for recently sold properties that are as comparable to your new, improved rental house as possible. For instance, you’d want to look for comps near your property in age, size, location, construction method and style, and condition. Specifically, you should look for at least three recently sold comps (i.e., sold within the last 90 days) that talk about recent upgrades or improvements.

Calculating ARV

When you’ve found three or more decent comps, you can then calculate your property’s after-repair value (ARV). There are two standard methods:

  1. Find the average sales price of comparable properties. For instance, if you found three good comps, add their sold prices together, divide by three, and then you would have the average price. This number is your property after-repair value (ARV), which should be used to estimate the likely sales price of your own single-family rental house after improvements and repairs.
  2. Find the average price per square foot of your comparable properties. Divide the total sales price by the average square footage of your comps. With an average price per square foot, you can then multiply that price by the number of square feet in your rental property. This method can be more precise than the first option but requires a few extra steps.

Using Your ARV

As soon as you know your property’s ARV, you can use it in several ways. First, this could assist with setting a better rental rate. By acknowledging how your newly renovated property compares to others in the neighborhood, you can dramatically increase your rental home’s potential. Another way that investors often take advantage of after-repair value is when buying investment properties.

When buying a new Lakeland investment property, you might take 70% of the property’s after-repair value and subtract the costs of repairs and improvements. The subsequent offer price can tell you where to begin bidding for a property. In certain circumstances, investors may go as high as 80% ARV, significantly increasing the chance of an acceptable offer. Of course, the higher the ARV you use to determine your offer price, the higher the risk for your profit margins afterward.

Coming up with an accurate after-repair value entails practice and skill. Even as many investors learn to do so on their own, it can be helpful to rely on the expertise of a real estate professional or property management expert. Either one can help you locate comparable properties and ensure that your calculations reflect the true nature of the property, its location, and its future potential as a rental house.

Have you recently completed renovations on your investment property? Contact Real Property Management Lakeside and request a rental market analysis to ensure you stay competitive. Call us at 863-877-1078 to speak with a Lakeland property manager today.

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