As a real estate investor it can be confusing oftentimes to make sense of all the terms you are hear in the real estate market. This can be especially true when it comes to deciphering home values in this market. Determining the value of a home in different conditions, before and after repairs is a critical part of investing. Part of that understanding is the terminology used when speaking with agents, contractors and real estate professionals. Below are 3 of the most common and most important:
This one is pretty straight forward whether you are a complete novice to real estate investing or not. The As-is value is simply the value of a property in it’s current condition without having any repairs done.
In the world of real estate investing ARV stands for After Repair Value. This is an estimated value of a property after it has been completely renovated. This is a crucial number for those flipping homes and allows you to calculate the spread between what you should buying it for and the price you can expect to resell it for.
Market value is the price a home is expected to go for on the open market. The most common interpretation of market value is most commonly known as and derived from the comparable sales approach. This involves determining market value by looking at the prices nearby comparable homes have recently sold for and is the most common value you will be referring to and be worried about figuring out in your real estate investment business. However when it comes to appraisals there are also two other ways appraisers asses a property’s value. The Replacement Value, the dollar amount it would cost to rebuild a specific home now at current construction costs plus the value of the land. Lastly, the Income Approach is used to determine the value of a property based on the income it provides. This value is usually given the most weight when it comes to commercial real estate investing where there are multiple units bringing in income.