ARV (After Repair Value)

What Is ARV?

After Repair Value, commonly referred to as ARV, represents the projected market value of a property after it has been renovated. It’s an essential figure for real estate investors, fix-and-flip professionals, and lenders alike. ARV is used to evaluate the profitability of a real estate investment and helps guide decisions on purchase price, renovation budgets, and financing strategies.

Example:

Imagine you purchase a property for $100,000 and invest $50,000 in upgrades. If, after the improvements, the property appraises at $200,000, then the ARV is $200,000. To arrive at this figure, investors analyze recently sold properties with similar features—known as “comps”—in the same neighborhood.

ARV and the BRRRR Strategy

When using the BRRR strategy (Buy, Rehab, Rent, Refinance, Repeat), ARV becomes even more important. Your total investment—purchase price plus rehab costs—should ideally not exceed 75% of the ARV.

For example, if you buy a home for $50,000 and put $25,000 into renovations, that’s a $75,000 total investment. If the property appraises for $100,000 post-rehab, you’ve hit that 75% threshold. When refinancing, most lenders will offer up to 75% of the property’s value. In this case, that’s $75,000—allowing you to recover all your invested capital.

How to Calculate After Repair Value

To calculate ARV, follow this simplified approach:

Step 1: Research Comps

Search for recently sold homes in the area with similar square footage, layout, year built, and condition (post-renovation).

Step 2: Adjust for Differences

If a comparable home has additional features like a finished basement or larger lot, adjust the value of your target property up or down accordingly.

Step 3: Determine Value Per Square Foot

Take the sale price of a comparable home and divide it by its square footage. Multiply this price-per-square-foot by your property’s size to estimate its ARV.

Example: a nearby renovated home sold for $250,000 and is 2,000 SqFt. $250,000 ÷ 2,000 = $125 per SqFt. If your property is also 2,000 sq. ft., the estimated ARV is $125 × 2,000 = $250,000.

Use comp tools to complete this process as accurately and efficiently as possible.

Steps to Determine ARV Accurately

1. Understand Local Market Trends

A strong or declining market can influence future values. Adjust your expectations based on whether prices are rising or falling.

2. Assess Renovation Scope

Factor in how much work is needed. Cosmetic upgrades may yield a higher ARV than structural repairs alone.

3. Leverage Local Experts

Realtors, appraisers, and contractors who know the market can offer invaluable insight on post-renovation value.

4. Use Online Tools

Use comp tools and websites like Zillow, Redfin, and Realtor.com to help guide your projections.

Tips for accurately estimating ARV

ARV estimates do not need to be perfect but they do need to be defensible and reasonable.

1. Gather the three most relevant comps -- closest, similar floorplan, similar architectural style, similar SqFt,
2. Adjust for differences.
3. Consider current interest rates and buyer demand.
4. Don’t overestimate the impact of renovations—stick to realistic market values.

Frequently Asked Questions

Can an Appraiser Estimate ARV?

Yes! In fact, most private lenders for fix and flip loans, hard money loans and bridge loans will require an independent certified appraiser to perform an ARV appraisal.

In an ARV appraisal report, the appraiser will reference your scope of work and compare the finished product to similarly upgraded properties in the area. Their opinion of value will be marked "subject to repairs" which is another way of saying ARV. The lender may also require the appraiser to include their opinion of As Is value in the report.

Where do you find After Repair Value?

If you're looking to identify ARV on a property, start with these tools and resources:

• MLS (Multiple Listing Service): For real-time sales data.
• PropStream: built-in comp tool
• Zillow, Redfin: Offer sales history and value estimates.
• Local Agents and Appraisers: Offer professional analysis and boots-on-the-ground insights.
• Investor Communities: Networking with other real estate investors can help you validate your numbers and get feedback on your assumptions.

Summary

Mastering ARV is essential for successful real estate investing. Whether you’re flipping homes or building a rental portfolio, knowing how to estimate a property's post-renovation value allows you to invest with confidence and protect your bottom line. Use comps, rely on expert insights, and always leave room for unexpected costs.

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