CHAPTER 8 Making Money on Flipped Houses y on Flipped Houses Determining whether a property will make a good flip depends largely on figuring out the After Repair Value (ARV) . There’s a simple formula for this:
property’s current value + value of renovations = ARV
For the current value, you should use the purchase price. The renovation value is a little trickier to manage, although the more properties you flip, the better handle you will have on these numbers. Particularly when you’re new, a real estate agent, appraiser, or contractor can help you get more accurate numbers. A good ARV involves looking at comparable properties (or comps) near the property you’re considering flipping. While you can do this on your own, an agent, such as myself, can also help with this. I can put together a Comparative (or Competitive ) Market Analysis (CMA) that will show you the value of all the comps in their completely fixed-up state. Renovations can vary from minor cosmetic fixes to major rehab. Your costs to renovate needs to include materials and labor, and should always take into account your end buyer. For example, if you’re flipping a commercial or rental property, your materials need to be within the span of what’s acceptable for that type of space in that type of market. However, if you’re flipping a residential property, you’ll want to make sure you do some upgrading to make sure you include the features buyers in that area are looking for. To keep costs low, make sure you shop around. Big box stores 56
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