If a successful lease is characterized by cash flow, then the purchase of real estate - ARV. What is this strange set of letters? With an abbreviation BRRRR you are already well acquainted, so you know that we don't use capital letters just like that. ARV briefly and succinctly characterizes... Although why are we explaining now, if there is a separate place for this.
❝ARV (After Repair Value) – this term reflects the new increased value of the property, which was achieved due to repairs and other improvements.❞
Such a simple and meaningful abbreviation is used to indicate the appraised value of an apartment or house and helps the owner understand how well he will manage to compensate for his expenses. ARVs have several uses. This term allows:
- estimate the amount of potential profit from the resale of an already finished object, brought to order. After calculating the After Repair Value, you will be able to determine whether it is worth investing in this or that real estate;
- determine the approximate budget that must be allocated for the repair of premises or their reconstruction;
- convince a bank or other financial institution that they can give you a loan for repairs and receive the full amount within the specified period.
We offer you to randomly choose one of the apartments without renovation in Kyiv new building and try to calculate the ARV yourself. The algorithm of actions is as follows:
- determine the current price of the object at the moment when it still needs the intervention of the designer and the repair team (just look at the price tag);
- explore similar offers on the market only with repairs. Choose real estate in the area where your "guinea pig" is located. By the way, such objects for comparison are called comparables or "comps" - here's another term for adding to the real estate dictionary;
- calculate the costs of repair work. It is important to take into account not only the materials themselves, but also the services of specialists;
- after that, collect all the indicators and perform simple mathematical operations with them:
Market value of the object + cost of repairs = ARV
For example, let's say you decide to buy a property for $170,000. This is a good three-room apartment in the Pechersk district - a real treasure. About $65,000 more will have to be spent on repairs. The ARV would then be $235,000. The received amount should be compared with prices for similar apartments with ready repairs. If you see that you will be able to sell the object for this amount and more, then it is definitely worth buying. If the ARV indicator turned out to be too high, you can count on the return of investments.
☝️ Do not forget that you are analyzing the current situation on the market, but after a few months it can fundamentally change both to your advantage and to its detriment.
Example of use:
- I saw such a thief at first sight. I can already imagine what repairs I will make in it. You can make good money on sales.
- Oh, so you have already calculated the ARV?
- What did you do?
- Everything is clear with you, businessman. First, you need to calculate the approximate cost of the apartment after renovation and compare it with current prices, and then it will be clear whether it will bring you at least $1.
If we have already mentioned about Pecherskyi district, we suggest you continue to get to know him. The cost of housing here is constantly increasing, so you are guaranteed to become the owner of a real treasure.
