Get the ARV wrong on a fix-and-flip deal and every other calculation is wrong too. Your MAO, your financing capacity, your profit projection — all of it flows from one number: what will the property sell for after renovation?
What Is ARV?
After-Repair Value is the estimated market value of a property in its fully renovated condition. Not the current value. Not the asking price. The projected value after all planned repairs and upgrades — assuming the renovation brings the property to the finish level reflected in your comparable sales.
ARV is an estimate, not a fact. It depends on the quality of your comparable sales analysis, the accuracy of your scope plan, and market conditions at the time you sell. Build a defensible estimate with a reasonable confidence band. Chasing a precise number is the wrong goal.
How to Calculate ARV
ARV uses the same comparable sales methodology appraisers use. Three steps.
Step 1: Find True Comparables
A comparable sale is a property that matches your subject in location, size, condition, and age. Tight comp criteria produce reliable ARV estimates. Loose criteria produce optimistic ones.
Core comp criteria:
- Same neighborhood or immediately surrounding area (within 0.5 miles)
- Similar square footage (within 15–20%)
- Similar bedroom and bathroom count
- Same property type (single-family, not condo)
- Sold within the past 90 days (180 days in slower markets)
- Renovated condition — not distressed
That last criterion matters most. You're projecting your exit as a renovated property, so your comps need to be renovated properties. Comparing against distressed sales understates your ARV. Comparing against luxury finishes overstates it.
Step 2: Adjust for Differences
No two properties are identical. When your comp has 3 beds and your subject has 2, apply a downward adjustment. When your comp sold 150 days ago in an appreciating market, apply an upward time adjustment.
Common adjustments:
- Bedroom count: $5,000–$15,000 per bed depending on market
- Bathroom count: $5,000–$12,000 per bath
- Garage: $8,000–$20,000
- Square footage: $50–$120 per square foot depending on market
These are estimates. The actual values depend on your specific market and price point. When in doubt, be conservative and let the comps speak louder than your adjustments.
Step 3: Reconcile to a Value
Once you have 3–5 adjusted comparables, reconcile them to a final value estimate. Weight the most similar comps more heavily. The result is a value range and a point estimate.
Example: three adjusted comps at $328,000, $342,000, and $335,000. The middle value at $335,000 is the most defensible ARV estimate. Your range is $328,000–$342,000.
Why Lenders Care About ARV
Hard money and bridge lenders fund at 65–75% of ARV. On a $350,000 ARV, that's up to $245,000 available to borrow. The lender's appraisal of ARV caps your financing.
If your ARV analysis says $350,000 and the lender's appraiser calls it $310,000, your borrowing capacity drops by $28,000 at 70% LTV. Running your own disciplined ARV analysis before you approach a lender helps you anticipate where the appraisal will land.
The 70% Rule
The 70% rule sets your maximum offer:
Maximum Offer = (ARV × 70%) − Estimated Rehab Costs
ARV $350,000, rehab $75,000:
Maximum Offer = ($350,000 × 0.70) − $75,000 = $170,000
The 70% multiplier leaves enough margin for closing costs, holding costs, and profit. At 70%, a standard deal with a 6-month hold and 6–7% combined closing and selling costs still generates a 15–20% gross margin on cost.
The 70% rule is a starting point. In competitive markets with fast timelines and low financing costs, some investors operate at 75–80%. In high-risk scopes or softening markets, 65% is more appropriate. Use it as a first filter, not a final decision.
ARV vs. Purchase Price vs. List Price
List price is what the seller is asking. No direct relationship to ARV.
Purchase price is what you pay. Your input into the MAO formula.
ARV is what the renovated property should sell for. Your output from comp analysis. The foundation of your deal economics.
A property listed at $150,000 with a $320,000 ARV after $80,000 in rehab works at a purchase price of $144,000 (if that's below your MAO). A property listed at $130,000 with a $200,000 ARV after $80,000 in rehab doesn't work at any price above $60,000. The list price is irrelevant in both cases.
Where ARV Analysis Breaks Down
ARV analysis works well when your comp pool is robust. It breaks down in three situations.
Thin markets. Rural areas, unique property types, and price points with few transactions may offer only 1–2 usable comps. Widen your time window, loosen your distance constraint, and acknowledge that your confidence band is wider than normal.
Fast-moving markets. Any comp older than 60 days in a rapidly appreciating or declining market may be materially stale. Apply a time adjustment or use only the most recent data available.
Scope-ARV mismatch. The most common ARV mistake is using fully renovated comps for a scope that produces a lower finish level. If your renovation budget delivers a 7/10 finish but your comps reflect 9/10 finishes, adjust ARV down $15,000–$30,000 depending on the market and price point.