What Is After-Repair Value?
ARV is the anchor number for every BRRRR deal, flip, and value-add project. It determines your maximum purchase price (via the 70% rule), your refinance loan amount, and the equity you walk away with. Calculate it using 3-5 sold comps within half a mile — sold, not listed — that match your planned post-rehab condition. Overestimating ARV by even 5% can cost you $15,000-$25,000 on a median-priced home. Conservative investors target the middle of their comp range, not the top.
The estimated market value of a property after all planned renovations are complete, based on comparable sales of similar properties in similar condition.
At a Glance
- ARV stands for After-Repair Value — what the property will sell for after renovation
- Calculated from comparable sales (comps), not from purchase price plus rehab costs
- The 70% Rule: your purchase price plus rehab costs should stay below 70% of ARV
- Used by hard money lenders to determine maximum loan amounts on rehab deals
- Drives your refinance amount in BRRRR — 75% LTV on the appraised (post-rehab) value
- Overestimation is the single most common mistake in BRRRR investing and house flipping
ARV = Average Adjusted Sale Price of Comparable Renovated Properties
How It Works
ARV answers one question: what's this property going to be worth after you finish the renovation? The answer comes from comparable sales — what buyers actually paid for similar properties in similar condition. Not what sellers listed them for. Listings are wish prices.
Pull 3-5 recently sold properties within half a mile. Sold within the last 3-6 months, same property type, within 10-15% of your square footage. Condition matters — you need comps that reflect your planned post-rehab finish level, not as-is distressed sales.
Then adjust. Your property has 3 bedrooms and a comp has 4? Subtract the value of that extra bedroom. Comp has a newer roof? Adjust downward. After adjustments, average the sale prices. That average is your ARV.
The 70% Rule uses ARV to set your maximum offer: Maximum Allowable Offer = (ARV × 0.70) − Rehab Costs. If your ARV is $200,000 and rehab costs are $40,000, your maximum purchase price is $100,000. This 30% margin absorbs holding costs, closing costs, and profit (for flips) or ensures sufficient equity for refinancing (for BRRRR).
Hard money lenders underwrite against ARV, not current value. A property worth $80,000 as-is with an ARV of $160,000 can qualify for a larger loan because the lender sees the post-rehab equity as their protection.
Real-World Example
You're evaluating a 3-bedroom, 1-bath ranch in a Memphis neighborhood. The house needs a full kitchen remodel, bathroom update, new flooring, and paint throughout. You estimate rehab costs at $38,000.
You pull five recently sold comps — all 3-bed, 1-bath ranches within 0.4 miles, sold in the last 4 months, all renovated:
Comp 1: $158,000 (1,180 sqft, updated kitchen, original bath) Comp 2: $167,000 (1,240 sqft, full renovation, new HVAC) Comp 3: $152,000 (1,100 sqft, cosmetic update only, smaller lot) Comp 4: $163,000 (1,200 sqft, full renovation, similar lot) Comp 5: $171,000 (1,300 sqft, full renovation, corner lot with extra parking)
Comp 5 is an outlier — corner lot with extra parking your property doesn't have. Toss it. Comp 3 is a cosmetic-only update, below your planned finish level — adjust up $5,000. Adjusted average of remaining 4 comps: $161,500. That's your ARV.
70% Rule check: $161,500 × 0.70 = $113,050. Subtract $38,000 rehab = $75,050 maximum offer. The property is listed at $95,000. The math doesn't work at asking price — you'd need to negotiate down to $75,000 or walk.
Pros & Cons
- Gives you a concrete ceiling for what a property is worth post-renovation — stops emotional overpaying
- Lets you calculate your maximum offer before making a bid, removing guesswork from negotiations
- Hard money lenders and DSCR lenders both rely on ARV, making your financing conversations data-driven
- Forces you to research the actual market before committing capital
- Creates a built-in safety margin when combined with the 70% Rule
- Only as good as your comps — garbage comps produce garbage ARV estimates
- Local market conditions can shift between when you estimate ARV and when you list or refinance (3-12 months)
- Appraisers may come in lower than your estimate, especially with conservative appraisers or thin comp pools
- The 70% Rule is a guideline, not a law — in competitive markets, some investors accept tighter margins
- First-time investors consistently overestimate ARV because they want deals to work
Watch Out
The #1 ARV mistake: using active listings instead of sold comps. Listings show what sellers hope to get — not what buyers will actually pay. In most markets, there's a 3-8% gap between list price and sold price. That gap alone can turn a profitable deal into a loss.
The #2 mistake: cherry-picking comps to justify a deal you already want to do. If three comps say $155,000 and one outlier says $180,000, your ARV isn't $180,000. It's $155,000. The outlier probably had something your property doesn't — a finished basement, extra bedroom, or better lot.
And watch the micro-market boundaries. Two houses 0.4 miles apart can sit in different school districts, different flood zones, or on opposite sides of a four-lane road. Those boundaries move comp values by 10-15%. Same zip code doesn't mean same market.
Ask an Investor
The Takeaway
ARV is the single most important number in any BRRRR deal or flip. Every downstream decision — purchase price, rehab budget, refinance amount, cash-on-cash return — flows from it. Get it wrong by 5-10%, and the entire deal structure breaks. Use sold comps (never listings), pull at least 3-5 within half a mile, toss outliers, and target the middle of the range. If the ARV doesn't support a 70% Rule offer, walk away. There are always more deals.