What Is After Repair Value?
After Repair Value — commonly known as ARV — is the estimated market value of a property after all renovations and repairs are complete. It is the single most important number in any fix-and-flip deal because it determines how much you can sell the property for, which directly affects your profit margin.
Getting the ARV right means the difference between a profitable flip and a costly mistake. Overestimate it, and you overpay for the property or overspend on renovations. Underestimate it, and you might pass on a great deal. At Real Estate Sales LLC, we teach our investors to calculate ARV with precision — here is exactly how.
The ARV Formula
The basic formula is straightforward:
Maximum Offer = ARV × 70% − Repair Costs
This is known as the 70 percent rule, and it is the industry standard for evaluating flip deals. The 30 percent margin accounts for your profit, closing costs, holding costs, and unexpected expenses. Some investors use 65 percent for a more conservative approach or 75 percent in competitive markets.
For example, if a property has an ARV of $200,000 and needs $40,000 in repairs, your maximum offer would be: $200,000 × 0.70 − $40,000 = $100,000.
How to Find Accurate Comparable Sales
Your ARV estimate is only as good as the comparable sales (comps) you use to calculate it. Here is how to find the right comps:
Location. The best comps are in the same neighborhood — ideally within a half mile of the subject property. Properties in the same subdivision or on the same street are ideal. As you expand the radius, the accuracy of your comparison decreases.
Recency. Use sales from the past three to six months. Real estate markets move, and a sale from 12 months ago may not reflect current values. In rapidly changing markets, prioritize the most recent sales.
Similarity. Your comps should match the subject property as closely as possible in square footage (within 10 to 15 percent), bedroom and bathroom count, lot size, age, and overall condition. A renovated 3-bedroom ranch is not comparable to a dated 5-bedroom colonial, even if they are on the same street.
Condition. This is where many investors make mistakes. You need comps that reflect the finished condition of your property after renovation — not as-is sales of distressed properties. Look for recently renovated or updated homes that represent what your property will look like when it is done.
Where to Find Comp Data
MLS (Multiple Listing Service). The MLS is the most comprehensive and accurate source of comp data. If you have a real estate license or a relationship with an investor-friendly agent, this should be your primary source.
Zillow, Redfin, and Realtor.com. These public-facing platforms pull data from the MLS and public records. They are useful for preliminary research but may not have the most up-to-date information or all the details you need.
County assessor records. Public records show sale prices, dates, and property details. They are free but may lag behind the MLS by several weeks or months.
Networking. Other investors and agents in your market can provide insight into recent sales and current market conditions that numbers alone cannot capture.
Adjusting Comps for Differences
No two properties are exactly alike, so you need to adjust your comps to account for differences between them and your subject property.
Square footage. Calculate the price per square foot of your comps and apply it to your subject property. If comps are selling for $120 per square foot and your renovated property will be 1,500 square feet, the estimated value would be $180,000.
Bedroom and bathroom count. An extra bedroom typically adds $5,000 to $15,000 in value depending on the market. An extra bathroom adds a similar amount. Adjust accordingly.
Lot size. A significantly larger or smaller lot affects value. In suburban markets, lot size premiums are more pronounced than in urban areas.
Upgrades and finishes. A property with granite countertops, hardwood floors, and stainless appliances will command a premium over one with laminate and basic finishes. Make sure your comps reflect the level of renovation you plan to execute.
Garage, basement, pool. These features add value, but the amount varies by market. A pool adds significant value in Las Vegas but may actually detract from value in markets with cold winters.
Common ARV Mistakes
Cherry-picking the highest comp. It is tempting to use the highest sale in the neighborhood to justify your numbers. Do not do this. Use the median of your comps for a realistic estimate. One outlier sale does not set the market.
Using comps that are too far away. A beautiful sale three miles away in a different school district is not relevant. Stay as close to the subject property as possible.
Ignoring market direction. If the market is declining, recent sales may overstate future values. If the market is rising, they may understate them. Factor the trend into your analysis.
Not visiting the comps. Drive by your comparable properties. Photos can be deceiving — a property might look great online but be on a busy road, next to a commercial property, or in a flood zone. Context matters.
Forgetting about days on market. A property that sold in 5 days was likely underpriced. One that took 180 days was overpriced. Adjust your expectations based on how long similar properties take to sell.
Using ARV in Your Deal Analysis
Once you have your ARV, you can work backward to determine your maximum offer price. Here is a complete deal analysis using the 70 percent rule:
ARV: $180,000 (based on 4 comparable sales)
Renovation estimate: $35,000
Maximum offer: $180,000 × 0.70 − $35,000 = $91,000
Estimated profit: $180,000 − $91,000 − $35,000 − $18,000 (holding/closing costs) = $36,000
If the seller is asking $110,000, this deal does not work at the 70 percent rule. You either need to negotiate the price down, reduce renovation costs, or pass on the deal.
Practice Makes Perfect
Calculating ARV accurately is a skill that improves with practice. The more deals you analyze, the better your instincts become. Start by analyzing properties in your target market even if you are not ready to make offers yet. Pull comps, estimate repairs, and run the numbers. Over time, you will be able to evaluate a deal in minutes instead of hours.
At Real Estate Sales LLC, our mentoring program includes hands-on deal analysis training where our coaches walk you through real deals and teach you to evaluate properties like a seasoned investor. Our students learn to crunch numbers with confidence and make offers backed by solid data.
Take the Next Step
Want to learn the complete system for finding, analyzing, and closing profitable real estate deals? Join our free Flip Cheap Houses webinar and see how our investors are building wealth through smart deal analysis and proven strategies.
