📋 Table of Contents
What is After Repair Value (ARV)?
After Repair Value (ARV) is the estimated market value of a property after all planned repairs and renovations are completed. It's the cornerstone of successful fix-and-flip investing, determining your maximum purchase price, renovation budget, and profit potential.
Why ARV is Critical for Fix-and-Flip Success:
- Purchase Price Determination: Helps calculate maximum offer price
- Budget Planning: Guides renovation investment decisions
- Profit Projections: Determines potential returns before buying
- Financing: Lenders use ARV for hard money loans
- Exit Strategy: Sets realistic sale price expectations
Methods for Calculating ARV
1. Comparative Market Analysis (CMA)
The most reliable method uses recent sales of similar properties. This is the gold standard for ARV estimation.
Basic ARV Concept
2. Cost Approach Method
Estimates value based on replacement cost:
ARV = Land Value + (Replacement Cost - Depreciation)
3. Income Approach
For rental properties, uses rental income potential:
ARV = Annual Rental Income ÷ Cap Rate
Step-by-Step CMA Process
Follow this systematic approach for accurate ARV estimation:
- Find Comparable Sales: 3-6 similar properties sold within 3-6 months
- Apply Location Criteria: Within 0.5-1 mile radius
- Match Property Features: Similar size, age, style, and condition
- Adjust for Differences: Account for variations in features
- Calculate Average: Weight comps by similarity and recency
🧮 Try Our ARV Calculator
Estimate your property's after repair value instantly using comparable sales and renovation costs analysis.
Calculate ARV →CMA Example:
Subject Property: 1,200 sq ft, 3 bed/2 bath ranch built in 1985
| Comp | Sold Price | Size | Adjustments | Adjusted Value |
|---|---|---|---|---|
| Comp 1 | $185,000 | 1,200 sq ft | No adjustments | $185,000 |
| Comp 2 | $195,000 | 1,300 sq ft | -$7,500 (100 sq ft) | $187,500 |
| Comp 3 | $178,000 | 1,150 sq ft | +$3,750 (50 sq ft) | $181,750 |
Estimated ARV: ($185,000 + $187,500 + $181,750) ÷ 3 = $184,750
Key Factors Affecting ARV Accuracy
Property Characteristics:
- Square Footage: Typically $50-150 per square foot difference
- Bedroom/Bathroom Count: Additional bedrooms add $5,000-15,000
- Lot Size: Larger lots command premium pricing
- Garage/Parking: Attached garage adds $10,000-25,000
- Updates/Condition: Modernized homes sell for 10-20% more
Market Conditions:
- Supply and Demand: Inventory levels affect pricing
- Seasonal Trends: Spring/summer typically stronger
- Interest Rates: Lower rates increase buyer purchasing power
- Economic Factors: Employment, population growth
Location Factors:
- School Districts: Quality schools add significant value
- Neighborhood Trends: Improving vs. declining areas
- Proximity to Amenities: Shopping, transportation, recreation
- Safety and Crime Rates: Impact buyer willingness to pay
Using Our ARV Calculator
Our calculator simplifies the ARV estimation process:
- Property Details: Enter basic property information
- Comparable Sales: Input 3-6 recent comparable sales
- Adjustment Factors: Account for differences in size, features, condition
- Market Analysis: Factor in current market trends
- Results: Get estimated ARV with confidence range
Common ARV Calculation Mistakes
⚠️ Avoid These Pitfalls:
- Using Outdated Comparables: Comps older than 6 months may not reflect current market
- Overestimating Renovation Impact: Not all improvements add dollar-for-dollar value
- Ignoring Market Ceiling: There's a maximum price buyers will pay in any neighborhood
- Poor Comparable Selection: Using properties too different in size, condition, or location
- Not Accounting for Time: Market values change during renovation period
ARV in the Context of Fix-and-Flip Analysis
The 70% Rule:
Many investors use this quick screening rule:
70% Rule Formula
70% Rule Example:
ARV: $200,000
Estimated Repairs: $30,000
Maximum Offer: ($200,000 × 0.70) - $30,000 = $110,000
Detailed Flip Analysis:
Complete Fix-and-Flip Calculation:
ARV: $200,000
Less Selling Costs (8%): -$16,000
Net Sale Proceeds: $184,000
Less Renovation Costs: -$30,000
Less Holding Costs (6 months): -$6,000
Less Financing Costs: -$8,000
Maximum Purchase Price: $140,000
Target Profit (15%): $30,000
Adjusted Maximum Offer: $110,000
ARV Verification Strategies
Before Purchase:
- Get multiple opinions (agents, appraisers, investors)
- Walk comparable properties if possible
- Research pending sales for market direction
- Consider hiring professional appraiser for large deals
During Renovation:
- Monitor new comps regularly
- Adjust scope based on market feedback
- Pre-market property to gauge interest
- Use recent comps within 6 months for accuracy
- Account for market trends and seasonality
- Don't overimprove for the neighborhood
- Factor in all costs including renovation and holding expenses
- Get multiple opinions before finalizing ARV estimates