Enter the current property value, appreciation rate, and number of years of renovation into the calculator to determine the After Renovation Value (ARV), which can also be evaluated given the other variables are known.
After Renovation Value Formula
The following formula is used to calculate the After Renovation Value (ARV) of a property:
ARV = (P * (1 + r)^n)
Variables:
- ARV is the After Renovation Value
- P is the current property value
- r is the appreciation rate
- n is the number of years of renovation
To calculate the After Renovation Value, multiply the current property value by the appreciation rate, then raise the result to the power of the number of years of renovation.
What is an After Renovation Value?
After Renovation Value (ARV) is a real estate term that refers to the estimated value of a property after all repairs and renovations have been completed. This value is typically determined by a professional appraiser who takes into account the condition of the property, the value of similar properties in the area, and the cost of the renovations. ARV is a crucial figure for investors who are considering purchasing a property to renovate and sell, as it helps them calculate their potential return on investment. It is also used by lenders to determine how much they are willing to loan for the property. If the ARV is significantly higher than the purchase price and cost of renovations, the investment is likely to be profitable.
How to Calculate After Renovation Value?
The following steps outline how to calculate the After Renovation Value:
- First, determine the current value of the property before renovation ($).
- Next, determine the cost of renovation ($).
- Next, calculate the increase in value due to renovation by multiplying the cost of renovation by the renovation factor (RF).
- Finally, calculate the After Renovation Value by adding the current value of the property to the increase in value due to renovation.
- After inserting the variables and calculating the result, check your answer with a real estate appraiser or online valuation tools.
Example Problem:
Use the following variables as an example problem to test your knowledge.
Current value of the property before renovation ($) = 250,000
Cost of renovation ($) = 50,000
Renovation factor (RF) = 0.75
