ARV, or after-repair value, is what a property should sell for once the renovation is finished. It is not what you paid, not what you paid plus the rehab, and not what the seller's agent says the neighborhood "is going for." It is a market estimate, and the only honest way to build one is from properties that actually sold.
Almost every downstream number in a value-add deal leans on it:
- The 70% rule caps your offer at 70% of ARV minus rehab.
- A BRRRR refinance lends a percentage of ARV, so ARV decides how much of your cash comes back.
- Flip profit is ARV minus everything you spent to get there.
Overstate ARV by 5% and each of those numbers moves in your favor at the same time. That is why it is the most-inflated input in real-estate underwriting.
Step 1: pull sold comps, not active listings
Start with closed sales. Active listings tell you what sellers hope for; pending sales tell you what buyers agreed to; only closed sales tell you what the market actually paid. Filter for:
| Filter | Typical range |
|---|---|
| Distance | Within about half a mile in a city, one mile in a suburb, wider in rural markets |
| Sale date | Last three to six months; go back further only if the market is thin |
| Size | Within roughly 20% of the subject's finished square footage |
| Bedrooms and bathrooms | Same count, or one off |
| Age and style | Same era and construction type where you can |
| Condition | Renovated or move-in ready, because that is what you are selling |
Condition is the one most people skip. A comp that sold in its original 1978 state tells you what your property is worth today, not after the rehab. You need comps that already look the way yours will.
Step 2: adjust, then convert to price per square foot
No comp is a perfect match, so adjust each one toward the subject. Comp has a garage and yours does not: subtract. Comp has one fewer bathroom: add. Keep the adjustments small and consistent; if you find yourself adjusting a comp by more than about 15% of its price, it is not a comp.
Then divide each adjusted sale price by its finished square footage. Three or four adjusted comps landing in a tight price-per-square-foot band is the signal that you have found the market. Wide scatter means you have mixed neighborhoods, conditions or property types.
Step 3: apply to the subject and round down
A worked example. Three renovated comps within half a mile, sold in the last four months, adjusted for differences:
| Comp | Adjusted price | Sq ft | Price per sq ft |
|---|---|---|---|
| 1 | $336,000 | 1,600 | $210 |
| 2 | $327,000 | 1,500 | $218 |
| 3 | $348,500 | 1,700 | $205 |
Average: about $211 per square foot. The subject is 1,600 square feet, so ARV is roughly $337,600. Round down, not up, to a number a listing agent would actually use: $335,000.
Rounding down is not pessimism. Appraisers and buyers both anchor on round numbers, and a refinance appraisal that comes in at $330,000 instead of $340,000 changes how much cash you get back.
The three mistakes that inflate ARV
Using the best comp instead of the typical comp. One outlier sale two streets over does not set the market. If you drop it and the average falls by $15,000, that is your real ARV.
Adding the rehab cost to the purchase price. Cost is not value. A $40,000 kitchen in a neighborhood that tops out at $300,000 does not create a $340,000 house. The comps decide what the market will pay for the finished product, regardless of what it cost you.
Comparing against unrenovated sales and then "adding for condition." Guessing the premium for a renovation is exactly the estimate that goes wrong. Find comps that are already renovated and let them tell you the premium.
What to do with the number
Once you have an ARV you can defend, the rest of the underwrite is arithmetic. For a flip, the 70% rule gives you a first-pass ceiling on the offer. For a BRRRR, the refinance loan is usually 70 to 80 percent of ARV, which is what decides whether you get your capital back; the BRRRR calculator shows all three refinance levels side by side.
And whichever strategy you run, treat ARV as a range, not a point. Run the deal at your number and again at 5% below it. If the deal only works at the top of the range, the comps are doing the work your offer should be doing.