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What Does ARV mean & Other Investing Terms Defined

Key Takeaways

  • As is value relates to the value of a property, without doing any renovations or rehabbing.
  • ARV is an acronym for after repair value, and calculating this number requires both subjective and objective analysis.
  • Market value is a number that estimates the actual value of a property, when readied for sale, after all repairs have been done.

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. At the top of the list might of questions you might have include: What does ARV mean? What does market value mean And how does one arrive at the  market value of real estate?

One of the most important concepts to grasp is that of “as is,” which is simply the value of a property without doing any repairs. ARV relates to the after repair value is the estimated value of a property after it has been rehabbed. While market value relates to the expected value of the home you expect to see when selling your home.

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 questions — including what does ARV mean — that might help you out:

What Does ARV Mean (and Other Terms Defined)

After repair value

As-Is

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.

As-is values are usually obtained through both subjective and objective analysis based on comparable properties in an area. Cost of expected repairs is usually included in such an analysis, and other costs — such as marketing and inspection fees — are deducted from the as is value. As is value is what is expected to be received in a given market.

ARV

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.

The ARV of a particular property will determine the exit strategy for that property. It will also suggest a financing route that is most appropriate. At its core, the ARV provides a great snapshot of whether an investment property is worth considering.

Determining the ARV on a given property does necessitate the skill to gather accurate repair estimates for a particular rehab project. This also includes knowledge of a market. Some experienced investors can walk into a property, take a few minutes to look around, and come up with a rough estimate of the ARV for a property. For beginners, this will mean looking at latest comps in the last 120 days, obtaining three repair contractor estimates, and material estimates from numerous local stores.

Market Value

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.

Do you have any other questions, such as what does ARV mean, that you’d like answered? Let us know in the comments below.

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