What Is ARV In Real Estate? (And Why Use It For Profitable Deals)
For those who are deeply engaged in fix-and-flips, wholesaling, or rental property investing, ARV (After Repair Value) is not something you can look away from.
ARV identifies whether a distressed property is a goldmine of investments or a money pit. But how exactly do you measure it? And how do top investors utilize it to get funding, make deals, and double their ROI at the same time?
In this guide, you’re going to learn:
✅ Pro tips to leverage ARV for financing and flipping
✅ The exact ARV formula used by professional house flippers
✅ How to find accurate comps (even in a competitive market)
✅ 3 awful ARV mistakes that sink beginner investors
Spoiler: Skip this step, and you risk overpaying for properties or leaving thousands on the table.
Why ARV is the One to Focus On as a Real Estate Investor
ARV isn’t just a number— it’s your blueprint to success. Here’s why:
- Flip Smarter: ARV determines the highest price that a renovated property can sell for, which means there’s no guesswork at all..
Win Financing: Hard money lenders will approve loans based on ARV (which is usually 70% of ARV minus the repairs that need to be done).
Price Like a Pro: Wholesalers set contracts and use ARV as the standard estimation to ensure cash buyers will be attracted.
Example:
Let’s say you find a home on sale for 120k but the house is rundown. You will need an extra 40k for repairs. If comps show a property in your area being sold for 220k, you can expect to profit around 60k, assuming all fees are taken out. If your ARV is just off by 10%, all your profit evaporates and you’re no better off.
How to Calculate ARV in 3 Steps (With Real-World Example)
Step 1: Pull Killer Comps
Use PropStream or MLS to get 3-5 recently sold properties:
- Same neighborhood (within 0.5 miles)
- Square footage (±10%)
- Bed/bath count
- Post-renovation condition (Condition of house after being renovated.)
Avoid “Zombie comps”—listings that are older than 3 months. The market shifts so quickly!
Step 2: Estimate Repairs Like a Contractor
You can break these into line items:
- Cosmetic (paint, flooring): $15k
- Kitchen remodel: $20k
- Roof replacement: $10k
Make sure to add an extra 10 percent leeway for surprises.
Step 3: Evaluate The Value of Improvements With the Formula
ARV = Current Value + Cost of Improvements
Wait, wait. Do not just calculate the total cost of construction! The new renovations must be coherent with the comps, otherwise, the new renovations will not add any value. For example, a $50k boost to the kitchen will not help if the local ARV is not boosted, meaning if the neighbors use laminate countertops the ARV will not soar.
Real-World ARV Example:
- Distressed Property Price: $150k
- Repair Costs: $50k
- Selling Price on Comparison Market Post Reno: $240k mean value
- ARV: Together With Distressed Value Plus Selling Price $240k
- Profit Potential: 240k – 150k – 50k = 40k
3 ARV Mistakes That Lower New Investors’ Estimated Values And How To Not Make Them
- “Apples-to-Oranges” Comps
Using a 4-bed comp for a 2-bed house? Big error. Stick to near-identical properties. - Overspending For Buying Price
Do not upgrade the house’s interior and put marble floors in a regular home neighborhood. The selling price should match what people in the area expect. - Not Paying Attention to Ongoing Expenses
ARV assumes a quick sale. If the market slows, property taxes and loan interest eat profits
Pro Tip: Talk to an agent in your area to confirm estimates. They will look for patterns within the MLS that aren’t always clear.
How You Should Fund, Purchase, or Negotiate Using ARV
- Hard Cash Financing: Most lenders offer 65-75% of ARV (minus repair costs).
Example: For example, if the ARV suggested value is 240k the loan would equal out to 168k (70%) and then adding construction fees of 50k to then set the purchase budget for 118k. - Wholesale Pricing: Assign contracts at 70-80% of ARV – repairs to attract cash buyers.
- Seller Negotiations: Justify buying distressed homes at low offers by showing sellers your ARV calculations.
Free Tools to Calculate ARV Like a Pro
- PropStream: Pull comps, estimate repairs, and analyze ARV in one dashboard.
- Mashvisor: Neighborhood-specific ARV insights for rentals/flips.
- BP Calculator: Free ARV spreadsheet from BiggerPockets.
FAQ: ARV in Real Estate
Q: Can ARV be higher than market value?
A: Yes! ARV reflects post-renovation value, which often surpasses current “as-is” prices.
Q: Do appraisers use ARV?
A: Yes—if you’re getting a renovation loan, appraisers will factor in ARV.
Q: How accurate is the 70% ARV rule?
A: It’s a starting point. Adjust based on your market risk (e.g., 65% in volatile areas).
Key Takeaway:
ARV isn’t just math—it’s your profit compass. Master it, and you’ll spot deals others overlook, negotiate with confidence, and flip fearlessly.
