What ARV actually is
ARV — After Repair Value — is what a property will sell for once the renovation is finished. Not what it is worth today, not the asking price, not an automated estimate. It is a forward-looking number, and every other number in a flip hangs off it: your maximum purchase price, how much a lender will advance, and whether there is any profit in the deal at all.
Get the ARV right and a mediocre rehab still makes money. Get it wrong by 10% and a perfect rehab loses money. That is why the method matters.
The ARV formula
That is the whole formula. All of the skill is in the second term: finding what similar, already-renovated homes near yours actually sold for per square foot. Comps in original condition tell you what the house is worth now; only renovated comps tell you what it is worth after.
How to calculate ARV in 5 steps
- Pull sold comps near the subject. Start within 1 mile and the last 6 months. Sold prices only — asking prices are opinions, closings are facts. In a thin or rural market, widen to 12–24 months before you widen the radius.
- Keep only true peers. Square footage within about ±30% of the subject, same property type (a duplex comps against duplexes, not single-family), similar beds/baths and year built, and on the subject’s side of any line that changes value — school district, waterfront, highway, neighborhood boundary.
- Keep the renovated ones. From that list, use the sales that were in finished, move-in condition — those are selling at the price your finished flip will compete at. Listing photos and days-on-market usually give it away.
- Compute each comp’s price per square foot, then average — after dropping outliers. A comp 25%+ above or below the middle of the pack usually has a story (off-market family sale, buyer overpaid, hidden damage). Averaging outliers in is how spreadsheets lie.
- Multiply by the subject’s square footage. Then round down, not up. Your lender’s appraiser will.
Worked example
Subject: a 1,400 sqft, 3/2 single-family in original condition. Four renovated sales within a mile in the last 8 months:
| Comp | Sqft | Sold | $/sqft | Call |
|---|---|---|---|---|
| A — 0.3 mi, 3/2, renovated | 1,350 | $324,000 | $240 | Keep |
| B — 0.5 mi, 3/2, renovated | 1,480 | $377,400 | $255 | Keep |
| C — 0.7 mi, 4/2, renovated | 1,520 | $377,000 | $248 | Keep |
| D — 0.4 mi, 3/2, renovated | 1,300 | $403,000 | $310 | Drop — 25% above the pack |
Average of the keepers: (240 + 255 + 248) ÷ 3 = $247.67/sqft. ARV = 1,400 × $247.67 = $346,700 → call it $345,000.
From ARV to your maximum offer
The classic screen is the 70% rule:
Continuing the example with a $60,000 rehab: $345,000 × 0.70 − $60,000 = $181,500. The 30% you held back has to cover holding costs, selling costs, financing and your profit — which is why the 70% rule is a first filter, not an underwrite. On a real deal, replace it with your actual loan terms, months of holding and closing costs.
The mistakes that sink flips
- Using asking prices as comps. Active listings are hopes. Use closings.
- Comping a renovated exit against unrenovated sales — guarantees you underprice the ARV and pass on good deals, or the reverse: using only the flashiest flip sale and overpaying.
- Ignoring square-footage gaps. $/sqft is not linear — small homes carry higher $/sqft than big ones. Stay inside ±30%.
- Crossing value lines. The same floor plan two blocks away, across a school-district or flood-zone line, is a different asset.
- Trusting an automated home-value estimate as ARV. Those models price the home in its current condition and hide their comps. You cannot defend a number to a lender if you cannot show where it came from.
- Stale comps in a moving market. Six-month-old sales in a market moving 1%+ a month need adjusting — or replacing.
Skip the spreadsheet. Type an address into our free ARV calculator — it pulls the property record and real sold comps onto a map, scores each comp for match quality, and sets the ARV from the ones you tick.
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