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Rehabilitating a property is not as straightforward a proposition as it may sound. While in theory it may seem like it should cost less to rehabilitate an existing structure than to buy vacant property and build an entirely new structure from the ground up, it’s not always as simple as that. Depending on the state a building is in, some parts of a structure may need to be torn down and rebuilt, rather than repaired. Surprise expenses can occur that you didn’t account for. This is why if you’re thinking of taking out an ARV rehab loan, before you do anything else, you need to research a few things and make sure you have concrete information to provide when it comes time to apply for the loan.

Assess The Cost

For this you will need an expert if you yourself are not experienced in evaluating a property’s true condition. An ARV rehab loan stands for After Repair Value, meaning that the hard money loan you get is going to be based on a percentage of what the property will reportedly be worth once the rehabilitation is complete.

To get maximum value from this ARV loan, you need to ensure that the after repair value is going to be in line with your actual cost of repair. A hard money ARV loan will usually go only up to 70% of the after repair value. It’s up to you to make the most of that and get an exact, accurate assessment of just how much rehabilitation is required. If you find that the costs of rehabilitation outstrip what you had planned for, that is a responsibility you will have to address yourself.

Get The Experts

Make sure that you have a thorough inspection done of a property you are considering rehabilitating. If the structure is older, ensure that the inspection is conducted with people experienced in the peculiarities of past building codes and standards.

For example, if you discover that asbestos is still lined in the walls of an older property, there will be an additional cost in safely removing the asbestos, since it is illegal to let it remain in the building, and it cannot simply be torn down and thrown into refuse. Asbestos removal is an extensive procedure that requires well protected experts to systematically remove it from the environment.

Do the same thing with other elements of the property infrastructure such as plumbing or electrical wiring. Get a good feel for the state of these elements. Very old electrical wiring, for example, is unlikely to be compliant with modern electrical code and so extensive rewiring will be required. Certain types of plumbing may be similar.

Get an honest evaluation of a building’s condition so that you can find out exactly how much it will cost and compare that with your own numbers when you formulate your ARV. By making sure you plan ahead, get all the facts and figures, and then put it into a concrete plan and report, you stand a much better chance of having a project that can benefit and profit from an ARV rehabilitation loan.