You’ve secured your investment property, now it’s time to add value through renovations and other improvements. Can’t decide what you want to renovate? Here’s how to maximize the after-repair value of your investment property.
What is ARV?
The after-repair value is the value of your investment property after it’s been improved and renovated. Your ARV is calculated based on the future value of your property, which helps lenders determine how much to lend. ARV is calculated by looking at comparable properties that have recently sold in the same general location. Some specific factors that affect your ARV include the condition of the property, age of the property, size of the property, construction and style of the property, and location of the property.
Tips to Maximize Your After-Repair Value
Here are some tips to help maximize the after-repair value of your investment property:
Stay Within Budget
If you want to get the most out of your investment, be sure to stay within your budget while renovating your property. Focus on adding elements that will maximize the value of your property over elements you personally like. The more you focus on adding elements that maximize your property’s value, the easier it is to stay within budget and increase your ARV. Staying within your budget is the first step to maximizing the after-repair value of your property.
Add Strategic Lighting Changes
Strategic lighting changes are relatively inexpensive and can really improve the after-repair value of your property. Consider swapping out old light fixtures with new, more efficient lighting. You can choose add dimmer switches to improve your home’s value as well. It’s also easy to increase your ARV by updating old light switch covers. Many lightning changes do not require a contractor, making it a quick and easy improvement to maximize your after-repair value. Even the slightest improvements can really stand out to buyers; get rid of the old light fixtures and add more appealing additions if you wish to improve your property’s ARV.
Increase Living Space
Adding an extension to the living space of your investment can be an expensive solution, but it can also add a lot of value to your property. Depending on the property’s location, increasing living space can deem useful for your ARV. Calculate the trade off in cost vs. value when making an addition to your property, as sometimes these expensive add-ons might not generate the profits you expect. Look at which additions would increase your ARV based on your property’s location to determine what would produce the most profits.
Change Paint or Flooring
Adding new flooring or changing the paint at your investment property will always help maximize your after-repair value. These simple improvements are easy to add into your budget without causing too much stress. Buyers always appreciate a fresh coat of paint or a brand-new floor. Watch your budget if you want to do full hardwood with bamboo or other unique woods; these high-quality woods can add up quickly.
Update or Renovate the Kitchen
If you’re looking for a major way to add value to your investment property, you should consider renovating the kitchen to include more modern features. A kitchen is where the buyer will be spending a lot of their time, so it’s worth investing in kitchen improvements to maximize your after-repair value. To spruce up a dull kitchen, consider adding a kitchen island or swapping out old appliances. The arrival of new technology has made old appliances outdated and boring, so adding new appliances will definitely benefit you when calculating your home’s after repair value.
RCN Capital offers short-term and long-term financing options for real estate investors. Our ARV loan program offers financing for up to 90% of the purchase price + 100% of renovation costs, not to exceed 75% of the after-repair value. Connect with us today to discuss your next fix & flip investment.