So I am a newbie and I would like to know what savvy investors think about their valuation formula. I guess for wholesale deals we are trying to buy at 65% so we can sell to re-habbers at 70% or so ? Any,way in todays market it isn’t going to be 65% of the appraised value is it, or is it more like 65% or ARV?
So my question really is what is ARV, is it the price we could move the real estate for in 30 days or less ? And, is this the way we should be evaluating deals at 65% ?
thanks for any replies.
It’s great if you are in a market where rehabbers can still make money. As a guage, hard money won’t lend for less than 50% of actual. Conventional non recourse commercial will lend at 65% of actual. If lenders will even consider ARV, you’ll have to find out how they run their comps.
It appears that it depends on the neighborhood and comps, ARV is becoming more like true value in some neighborhoods because of the large number of foreclosures. So recent comps where the homes sold in 30 days or less. Homes that were repaired-updated properly etc. Lenders are looking forward at what comps might be 6 months from now in those neighborhoods. I live in Denver so some neighborhoods like parts of aurora are especially bad. but 65% ARV is still available at the reduced comps. Thanks for the replies .
The answer to this question is very locally dependent. The only way to really tell is get recent comps - less than 6 months MINIMUM and preferably under 90 days old. Check out the list prices, Days on Market (DOM) and sale price as well as the size/age/type of property. That will give you a real good picture of what is selling for how much and for how long.
the best way to find out what investors are willing to pay is to put homes that they are interested in under contract, then offer to sell the contract. As far as I know that is the best way to do it. Worrying about what they might do accomplishes very little except for giving you one more excuse not to start making money