October 21, 2024 | 2 Minute Read
FIRST COMMANDMENT: THOU SHALT KNOW THE ARV
It’s hard to believe, but it’s been almost 23 years since I became a real estate investor.
Over that time, I’ve completed over 2,000 deals, generated hundreds of millions in profit, and now I am here with REI.School helping investors like you with insight, analysis and strategies to help you succeed in this business.
Through all of this, I’ve learned the essential rules of REI (you could even call them the “secrets”).
But instead of keeping them to myself, I want to share them with you. After all, that is what this weekly newsletter is all about.
As some of you may know, I just got married in August (where’s the wedding gift, by the way?). After adjusting the last few months to an amazing life with my wife, I figured it’s the perfect time to celebrate by dropping some GOLD.
Behold…
THE 10 COMMANDMENTS OF HOUSE FLIPPING
Thou shalt know the After Repair Value (ARV)
Thou shalt keep multiple exit strategies
Thou shalt make offers daily
Thou shalt leverage the inspection period
Thou shalt not advance money to contractors
Thou shalt build relationships
Thou shalt master Other People’s Money (OPM)
Thou shalt view failure as a lesson
Thou shalt respect the game
Thou shalt be nice
I’ll be discussing these commandments one by one in future newsletters, but for today, we’ll start with the the first commandment:
FIRST COMMANDMENT: THOU SHALT KNOW THE AFTER REPAIR VALUE (ARV)
In case you’re unfamiliar, ARV stands for After Repair Value—basically, it’s the price a property will sell for once all the renovations are complete. It’s not a guessing game. It’s a science, and when done right, it can be calculated with pinpoint accuracy.
I use the ARV as the cornerstone of our all our strategies, and here’s why:
It can be determined by analyzing recent neighborhood trends
It dictates how to structure deals using 100% OPM (Other People’s Money)
It guides us on exactly what renovations are needed for a property
It tells us how long it will take to sell a property
It shows us exactly how much profit we’ll make on a deal
In short, ARV is EVERYTHING. It’s the key to unlocking success for the top 1% of real estate investors.
If you want to build a life by design like we do in the Flip Family, you’ve got to master ARV.
Here are some tips:
Don’t stretch your comps
Don’t let realtors push you into a deal
Don’t make decisions based on a hunch
Do know the formula inside and out
Get this right, and you shall be rewarded (and your bank account). Get it wrong, and you will lose more than just your shirt.
Stretching the ARV is the number one reason new investors and YouTube “gurus” fail in this business.
Next week, we will discuss the Second Commandment: Why having multiple exit strategies is essential for every deal.