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Getting the Right ARV for Up-and-Coming Neighborhoods
Many are chasing flip and profit dreams in areas that are more “coming” than “up.” While it is true that you make your money on the buy, you also lose money by miscalculating the After Repair Value (ARV) that a new homeowner would be willing and able to pay.
Here are some common mistakes…
- Expecting the market to reward you for over-improvements. As your rehab budget stretches, you may want the ARV to expand at the same rate. The reality is that the forces outside of the property can be just as significant on the value as your rehab work. Poorly maintained homes on the same block will have a negative impact on the valuation of your property. Striving to have the best house on the block is risky. Ration your choices on materials and finishes by the neighborhood.
- Choosing bad comps. The better you understand your target neighborhood, the more you will get the block by block nuances. Misunderstanding a block could cost you $50-100k in some areas. If the number of settled transactions have been slim over the last six months, you should look at the pending, expired, and withdrawn MLS listings to give you an idea of how prospective homeowners value the area. Don’t base your profit on overly rosy comps. Note: this applies to rentals as well. Don’t gloss over the condition of the homes on the same block and the size of the rental units. For instance, you should not base your projected revenue on a proposed three bedroom house rental on the expected rent for a two-bedroom apartment. Both types of rentals target different households.
- Being off in your “hipster” forecast. “Follow the hipsters” has been safe money for investors for years. When I see a lot of overtly hipster furniture staging, like in the photo for this post, the target audience is clear. But will the vintage table alone make them buy if the block screams “not yet” on the exterior? The more established the hipster community, including new coffee shops and restaurants, the more premium you can comfortably expect. Err on the side of conservatism on the timeline for true neighborhood transformation, even if that means holding as a rental for a period.
July Key Market Statistics
(Statistics shown are for rolling 12 months ending in July)
(19143) West Philadelphia-Cobbs Creek/Cedar Park
| July 17 | July 18 | % CHG | |
|---|---|---|---|
| Total Sales | 444 | 532 | 20% |
| Lowest Sales | $11K | $14K | 24% |
| Highest Sales | $1,545K | $800K | -48% |
| Average Sales | $141K | $154K | 9% |
| Days On Market | 46 | 37 | -20% |
(19104) West Philadelphia-University City/Mantua
| July 17 | July 18 | % Chg |
|
|---|---|---|---|
| Total Sales | 155 | 181 | 17% |
| Lowest Sales | $13K | $14K | 8% |
| Highest Sales | $2,400K | $1,250K | -48% |
| Average Sales | $255K | $253K | -1% |
| Days On Market | 45 | 38 | -16% |
(19139) West Philadelphia-Walnut Hill/Haddington/Mill Creek
| July 17 | July 18 | % Chg | |
|---|---|---|---|
| Total Sales | 232 | 273 | 18% |
| Lowest Sales | $5K | $8K | 50% |
| Highest Sales | $607K | $585K | -4% |
| Average Sales | $89K | $109K | 22% |
| Days On Market | 60 | 41 | -32% |
Upper Darby
| July 17 | July 18 | % Chg | |
|---|---|---|---|
| Total Sales | 1,038 | 1,092 | 5% |
| Lowest Sales | $14K | $21K | 50% |
| Highest Sales | $415K | $435K | 5% |
| Average Sales | $127K | $139K | 9% |
| Days On Market | 71 | 56 | -21% |
Chester
| July 17 | July 18 | % Chg | |
|---|---|---|---|
| Total Sales | 200 | 210 | 5% |
| Lowest Sales | $5K | $5K | 0% |
| Highest Sales | $165K | $255K | 55% |
| Average Sales | $53K | $57K | 7% |
| Days On Market | 57 | 56 | -2% |
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Veronica comes from a family of real estate investors. She is passionate about helping clients create wealth, build a legacy, and design a dream lifestyle through real estate.
What makes Veronica stand out from other realtors is her financial background. With an MBA in Finance from The Wharton School and a bachelor’s degree in Economics from Northwestern University, she does not run from the numbers. She spent over a decade running financial models to help her employers evaluate projects and products. This skill allows her to simplify the bottom line for a homeowner or forecast the return on investment for a developer.
Veronica is a licensed realtor in PA. Veronica helps her clients buy, sell, invest in real estate in the following neighborhoods in the Philadelphia metro area: Cedar Park, Chester, Cobbs Creek, Darby, Drexel Hill, Germantown, Kingsessing, Lansdowne, Marcus Hook, Overbrook, Overbrook Farms, Sharon Hill, University City, Yeadon, and Upper Darby. Her company also provides property management services for single-family homes and small apartment buildings in the area.