After-Repair Value (ARV)

What is after-repair value?

After-repair value (ARV) is what a property will be worth once planned renovations are complete. It anchors every value-add strategy: flippers set maximum purchase prices as a percentage of ARV (the 70% rule), hard money lenders cap loans at 65% to 75% of ARV, and BRRRR investors size their cash-out refinance from it.

ARV is estimated from comparable sales, recently sold homes of similar size, age, and style in the immediate area that are already in renovated condition. The discipline is matching the comp’s condition to your post-renovation product: comparing your planned mid-grade rehab against comps with luxury finishes inflates ARV and destroys deal math. Standard practice uses three to six sold comps within roughly half a mile and six months, adjusted for square footage and features.

Overestimated ARV is the most common fatal error in flipping and BRRRR. Every downstream number, maximum offer, loan size, projected profit, inherits the error, and the market delivers the verdict through the appraisal or the resale. Experienced investors estimate conservatively, verify with agents or appraisers who know the submarket, and stress-test deals at 5% to 10% below their ARV estimate.

Worked example

A dated house is available for $140,000. Renovated comps of the same size nearby sold for $225,000, $232,000, and $228,000, supporting a $228,000 ARV. With $45,000 of repairs, the 70% rule caps a flipper’s offer at 0.70 × $228,000 − $45,000 = $114,600, so at $140,000 the deal fails, unless the buyer is a landlord underwriting on rent instead.

Frequently asked questions

How do I calculate ARV accurately?

Pull three to six sold (not listed) comps within about half a mile and six months that match your property’s size, age, bed/bath count, and, critically, your planned post-renovation condition. Adjust for differences in square footage and features, weight the most similar comps heaviest, and sanity-check with a local agent or appraiser. Zillow-style estimates are starting points at best; they cannot distinguish renovated from original condition.

What happens if my ARV estimate is wrong?

Every number built on it breaks. For a flipper, a 10% ARV miss on a $250,000 project is $25,000 straight out of projected profit, often the entire margin. For a BRRRR investor, a low refinance appraisal shrinks the loan and traps capital in the deal. This asymmetry is why professionals estimate conservatively, demand bigger margins on thin comps, and walk from deals that only work at aggressive ARVs.

Related tools and guides

• Real Estate Investment Calculator