The formula to calculate the After Renovation Value is:
\[ \text{ARV} = \text{P} \times (1 + \text{r})^\text{n} \]
Where:
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.
Let's assume the following values:
Using the formula:
\[ \text{ARV} = 200000 \times (1 + 0.05)^3 = 200000 \times 1.157625 = 231525 \]
The After Renovation Value is $231,525.