ARV stands for after repair value. It is the price a property should sell for once the planned renovation is finished. It is not the purchase price plus the budget, it is not the county's number, and it is not the seller's hope. It comes from one place: what finished homes like yours, close to yours, sold for recently.
Investors use ARV to decide what to offer. Lenders use it to size a fix and flip loan. Appraisers are asked to confirm it before closing. Here is how to build the estimate the way a careful underwriter would.
The short version
A common working formula:
ARV = median price per square foot of renovated comps x square footage after the work. The lowest and highest comps give you the range. The median gives you the number to plan on.
The formula is the easy part. The judgment is in which sales count as comps. That is where most ARV mistakes are made.
Step 1: Define the finished house
Before you look at a single sale, write down what you are going to sell. Comps are matched to the finished product, not to the house as it stands today.
- Square footage after the work. If you are adding a room or finishing a basement, use the new number, and only count space that will be permitted and livable.
- Bedrooms and bathrooms after the work. Adding a bathroom changes which homes are comparable.
- Finish level. Builder-grade, mid-range or high-end. A high-end kitchen in a mid-range neighborhood does not make it a high-end house.
- What does not change. The lot, the street, the school zone, the view, the year it was built. Those follow the house.
Step 2: Pull the right comps
A comp is a recent sale of a similar, renovated home near yours. Start tight and widen only when you have to. A disciplined starting filter looks like this:
| Filter | Start here | Why it matters |
|---|---|---|
| Distance | About half a mile in a suburb; wider only in rural areas | Value changes across a freeway, a school boundary or a busy road |
| Sale date | Sold in the last 6 months; stretch to 12 only if sales are thin | An older sale reflects an older market |
| Size | Within about 20% of your after-repair square footage | Price per foot falls as homes get larger |
| Bedrooms and baths | Within one of your after-repair count | Buyers shop by bedroom count first |
| Age | Built within about 10 years of yours | Era drives layout, ceiling height and buyer pool |
| Condition | Renovated or new, at a finish level like yours | A dated sale tells you the as-is value, not the ARV |
When you widen a filter, write down which one and why. "Two comps came from 0.9 miles because nothing renovated sold closer" is a defensible estimate. A set of loose comps with no explanation is not.
Look at the active listings too. Homes for sale right now, under the same filters, tell you what you will be competing against on the day you list. Treat them at their asking price as a ceiling check, not as proof of value: a listing is not a sale.
Step 3: Price it by the square foot
Divide each comp's sale price by its living area. Line them up from low to high. The median is your working figure, because it is not pulled around by one unusual sale. The range shows how much room for error the market is giving you.
As a rule of thumb, the top of a renovated comp set is what a well-finished house can reach, and the middle of an unrenovated set is roughly the as-is value. The gap between the two is the value the renovation creates. If that gap is smaller than the budget, the project does not pay.
One worked example
Every figure below is a hypothetical illustration, not a quote, an appraisal or a promise of terms. It is here to show the mechanics.
An investor is buying a dated 3-bedroom, 1-bath house. The plan adds a second bathroom inside the existing footprint and brings the whole house to a mid-range finish. After the work it will be 1,500 square feet, 3 beds and 2 baths.
Five renovated 3- and 4-bedroom homes sold within half a mile in the last six months, all between 1,250 and 1,800 square feet:
| Comp | Square feet | Sale price | Price per square foot |
|---|---|---|---|
| A | 1,420 | $585,000 | $412 |
| B | 1,610 | $689,000 | $428 |
| C | 1,380 | $614,000 | $445 |
| D | 1,550 | $699,000 | $451 |
| E | 1,290 | $606,000 | $470 |
- Median. The middle of $412, $428, $445, $451 and $470 is $445 a square foot.
- ARV. $445 x 1,500 square feet = about $667,500.
- Range. $412 x 1,500 = $618,000 at the low end; $470 x 1,500 = $705,000 at the high end.
- Ceiling check. Two similar homes are listed nearby at about $489 a square foot. They have not sold. They say the top of the range is reachable, not that $733,500 is the number.
Plan on $667,500. Know that the market could pay as little as $618,000, and make sure the deal still works there.
Run your own house through it. The free ARV Estimator takes the address, the condition and your plan, pulls as-is and after-repair comps from recent nearby sales, and shows both values side by side. Every comp it finds links to its source so you can check it.
Testing the deal: the 70% rule
Once you have an ARV, flippers often screen the offer with the 70% rule: pay no more than 70% of ARV, minus the renovation cost. The 30% left over is meant to cover holding costs, financing, closing and selling costs, and profit.
On the example: $667,500 x 70% = $467,250. Subtract a $90,000 renovation budget and the rule points to a maximum offer of about $377,250.
The rule is a shortcut, not a law. In higher-priced markets the fixed costs are a smaller share of the price, and investors often work above 70%. In slower markets, or on longer projects, 70% can be too generous. It is also a flipper's rule, not a lender's: it does not tell you how much a lender will advance. Use it to throw out bad deals fast, then run the real numbers.
Five numbers that are not ARV
- Purchase price plus budget. Spending $90,000 does not add $90,000 of value. Some work adds more than it costs; a lot of it adds less.
- The county's assessed value. It is set for property tax, it often trails the market by years, and in some states it is capped by law. It tells you nothing about a renovated sale.
- An online automated estimate. It does not know the house has no second bathroom today, or that yours will have quartz counters. Use it to find the neighborhood, not to value the house.
- The best sale on the street. One record sale is a data point, not a market. The median exists for a reason.
- The value you need. If the deal only works at the top of the range, the deal does not work.
Adjustments: keep them few and honest
No comp is a perfect match. A pool, a garage, a larger lot, a view or a busy street can move value up or down. Adjust only for the differences buyers in that neighborhood actually pay for, and keep the adjustments small. If a comp needs five adjustments to fit, it is the wrong comp. Find a better one.
How a lender uses your ARV
On a fix and flip or bridge loan, the after-repair value is one of the numbers that sizes the loan, alongside the purchase price and the renovation budget. A lender reads your comps, checks them against its own, and orders an appraisal that confirms the value before closing.
That is why a clean ARV helps you. A comp set built on close, recent, renovated sales, with the widened filters written down, reads fast and holds up at appraisal, so the loan is far less likely to move late in the process. For more on how equity changes that conversation, see Why 35% Down Matters.
Questions investors ask about ARV
What does ARV mean in real estate?
ARV stands for after repair value: what a property should sell for once the planned renovation is finished. It is an estimate built from recent sales of comparable renovated homes nearby, not from what the work costs.
What is the formula for ARV?
A common working formula is the median price per square foot of renovated comparable sales multiplied by the square footage of the house after the work. The range of the comps gives you the low and high end of the estimate.
Is ARV the purchase price plus the renovation budget?
No. The market does not pay you back dollar for dollar for what you spend. ARV comes from what finished homes nearby actually sold for. A renovation can add less value than it costs, especially when it pushes the house above what the neighborhood supports.
How many comps do you need for ARV?
Three to five good comps is a common working set. Fewer close matches beat many loose ones. If you have to widen the distance or the date range to find them, say so and treat the estimate with more caution.
What is the 70% rule in real estate?
A flipper's rule of thumb: pay no more than 70% of ARV, minus the renovation cost. The 30% gap is meant to cover holding costs, financing, selling costs and profit. It is a screening shortcut, not a lending standard.
Can I use the county assessed value or an online estimate as ARV?
No. An assessed value is set for tax purposes and often trails the market by years. An automated online estimate does not know the condition of the house or the finish level you plan. Use recent comparable sales.
Have a flip in mind? Enter the purchase price, the budget and your ARV, and see the program, the rate and the maximum loan in a few minutes. Price a Deal. Fix and flip loans are available in 40 states; see where we lend.
This article is provided for general informational purposes only. It is not a commitment to lend, an appraisal, or investment, legal, tax, or financial advice. All figures, comparable sales, and scenarios above are hypothetical illustrations, not a valuation, loan quote, rate representation, or promise of available terms. Property values depend on the specific property and market. Loans are for business purposes only. Actual loan terms, pricing, and transaction results vary and are subject to underwriting, appraisal, documentation, and applicable law.