Real Estate Appraisal

A real estate appraisal is a licensed appraiser's opinion of a property's market value. On a BRRRR the refinance lender orders one after the rehab, and the appraiser's figure, not your estimate, is the after-repair value the new loan is sized on. It is the single largest risk in the strategy.

Appraisers value renovated one to four unit property mainly by the sales comparison approach: recent sales of similar, finished properties nearby, adjusted for differences. If those sales do not exist, the appraiser cannot support your ARV and will not invent it.

A 10% miss on a $260,000 ARV cuts the refinance loan by $19,500 and leaves that much more cash in the deal. Document the scope of work with receipts and photos, since underwriters compare the appraisal to purchase price plus improvements. And underwrite at 5 to 10% below your own estimate before you offer.

Further reading: Real Estate Appraisal on Wikipedia.