ARV in Real Estate: What It Is, How to Calculate It, and Why It Drives Every Flip
ARV (After Repair Value) explained: what it means, how to calculate it from comparable sales, the 70% rule that sets your max purchase price, and how ARV drives BRRRR refinancing. Includes a full Memphis worked example with 70% rule and BRRRR math side by side.
Every fix-and-flip and BRRRR deal starts with one number calculated before an offer is made, before a contractor walks the property, and before a dollar of rehab budget is committed. Get that number right and the deal works. Get it wrong and you lose money with perfect execution.
That number is ARV.
This guide covers what ARV means, how to calculate it from comparable sales, the 70% rule that converts ARV into a maximum purchase price, and how the same figure determines how much cash you can pull out in a BRRRR refinance. All three frameworks are illustrated with the same Memphis, TN property so the math connects across each use case.
What Is ARV (After Repair Value)?
ARV, or After Repair Value, is the estimated market value of a property after all planned renovations are complete. It is a pre-purchase projection calculated from comparable sales of fully updated properties in the same neighborhood, used to determine a maximum bid price, set a rehab budget ceiling, and evaluate whether a deal generates sufficient margin before any money is committed.
ARV is not an appraisal, a listing price, or an asking price. It is a number you calculate before buying, based on what similar renovated properties have actually sold for in the recent months in the same area.
For a house flipper, ARV sets the exit value of the project: the price you expect to sell for after renovations are complete. For a BRRRR investor, it sets the refinance ceiling: the appraised value the lender uses to determine how much equity you can extract. In both strategies, every other number in the deal flows from this single estimate.
ARV answers three questions before you write a check:
- What will this property be worth when the renovation is done?
- How much can I afford to pay for it today?
- How much can I spend on rehab before the deal stops working?
How to Calculate ARV: The Comp Method
ARV is calculated from comparable sales: recent closed transactions of similar, fully updated properties within the same neighborhood. Here is the process, step by step.
Pull closed sales from the last 90 days. Use a half-mile radius in urban and suburban markets; expand to one mile in rural areas where inventory is thin. Only closed sales count. Listings and under-contract properties reflect asking prices, not what buyers actually paid.
Match property configuration. A 3-bedroom, 2-bathroom comp is relevant to a 3BR/2BA subject property. A 4-bedroom comp distorts the sample unless you are adding a bedroom to the deal. Match beds, baths, and approximate square footage within 200 square feet.
Match condition. Your ARV target should reflect the finished condition of your renovation, not the best renovation in the neighborhood. If a comp has high-end finishes and yours will be mid-range, adjust down 5 to 10 percent on that individual comp before averaging.
Average the sold prices. Collect at least 3 comps, ideally 5 to 7 when data supports it. Average the sold prices. Do not anchor to the highest sale unless your renovation scope and location quality genuinely match it.
Apply a conservative buffer. Subtract 5 to 10 percent from the averaged comp price to account for market movement between your purchase and exit sale, days-on-market variance, and any risk that a comp is a slight outlier. This produces your working ARV.
A properly run CMA is the foundation of an accurate ARV: our guide to CMA for real estate investors covers how to select comps and adjust for condition differences. Automated Valuation Models (AVMs) can be a starting point for ARV research, but have significant limitations. Our guide to AVM in real estate explains what AVMs are and when not to rely on them.
ARV Worked Example: Memphis, TN
Here is how each step plays out on a real deal type.
The property: 3-bedroom, 2-bathroom single-family home in Memphis, TN. Current condition: dated kitchen, original bathrooms, carpet throughout. As-is value: $95,000.
The rehab budget: $45,000. Scope includes a full kitchen renovation, two bathroom updates, new flooring throughout, HVAC service, and exterior paint.
The comps: Three recent closed sales of fully updated 3BR/2BA homes within a half mile:
| Comp | Sale Price | Days Since Closed | Notes |
|---|---|---|---|
| Comp 1 | $175,000 | 42 days | New kitchen, both baths updated |
| Comp 2 | $168,000 | 68 days | Same floor plan, updated throughout |
| Comp 3 | $178,000 | 31 days | Higher-end finishes, slightly larger lot |
ARV calculation: ($175,000 + $168,000 + $178,000) / 3 = $173,667. Rounded conservatively: $174,000 ARV.
All-in cost at the asking price: $95,000 (purchase) + $45,000 (rehab) = $140,000.
Gross margin at the asking price: $174,000 - $140,000 = $34,000.
That $34,000 gross margin looks promising until you account for the friction costs of a flip: a 5 to 6 percent selling commission ($8,700 to $10,440), 60 to 90 days of holding costs during the rehab and sale period (property taxes, insurance, utilities: roughly $1,500 to $2,500), and hard money or bridge financing costs if you used leverage (2 to 4 percent of the loan amount). Net profit compresses significantly depending on timeline and financing structure.
This is why experienced flippers do not start with the gross margin. They start with ARV and work backward to what they can afford to pay for the property.
The 70% Rule: Setting Your Maximum Purchase Price
The 70% rule converts ARV directly into a maximum purchase price. It is industry shorthand that has held up across market cycles because it builds in enough buffer to absorb the full cost structure of a typical flip.
Formula: Max Purchase Price = (ARV x 0.70) - Estimated Rehab Cost
Memphis example:
- ARV: $174,000
- Rehab: $45,000
- Max Purchase Price: ($174,000 x 0.70) - $45,000 = $121,800 - $45,000 = $76,800
The 30 percent buffer embedded in the 70% rule is designed to cover selling costs (6 to 8 percent of ARV), holding and financing costs (4 to 6 percent), and a target profit margin of 15 to 20 percent. If the rehab runs 10 percent over budget or the property sits on market longer than expected, the deal still survives.
In the Memphis example, the as-is asking price of $95,000 does not pass the 70% rule. That means the investor either negotiates the purchase price down, tightens the rehab scope to bring the $45,000 budget lower, or passes on the deal entirely. The 70% rule is a filter, not a courtesy.
70% rule reference table:
| ARV | Rehab Cost | Max Purchase Price (70% Rule) |
|---|---|---|
| $120,000 | $25,000 | $59,000 |
| $150,000 | $35,000 | $70,000 |
| $174,000 | $45,000 | $76,800 |
| $200,000 | $50,000 | $90,000 |
| $250,000 | $60,000 | $115,000 |
Markets with strong demand and short days on market sometimes support 75 percent deals. Slower markets may require 65 percent to preserve margin. The 70% rule is the standard starting point; adjust based on your specific market data and how fast properties are moving.
ARV in BRRRR Deals
BRRRR investors use ARV differently than flippers. The exit is not a sale. It is a cash-out refinance. Instead of selling at ARV, you borrow against it.
Most lenders offering DSCR cash-out refinances will lend 70 to 75 percent of the stabilized (post-renovation) appraised value. At 75 percent LTV, here is how the Memphis property plays out when purchased at the 70% rule price:
Purchase price (70% rule): $76,800 Rehab cost: $45,000 Total all-in: $121,800
ARV: $174,000 Cash-out at 75% LTV: $174,000 x 0.75 = $130,500
Capital recovered: $130,500 - $121,800 = $8,700 surplus
At the 70% rule acquisition price, the BRRRR refinance at 75 percent LTV returns every dollar invested plus $8,700 in additional capital. The investor retains the property, has a tenant covering the mortgage, and deploys the recovered capital into the next deal. That is the compounding logic of BRRRR: ARV-driven math that lets one dollar fund multiple acquisitions.
The refinance step typically uses a DSCR loan, which qualifies on the property's rental income rather than the investor's personal tax returns or W-2s. The rent must cover the PITIA payment at the new, higher loan balance, which is one more reason ARV accuracy matters: a higher ARV supports a larger refinance, but only if the rental income supports the resulting debt service.
For the full BRRRR strategy breakdown from acquisition through the repeat step, see The BRRRR Method Explained.
Common ARV Mistakes
Using listing prices instead of closed sales. A listing at $190,000 is an ask, not a transaction. Only closed sales reflect what buyers actually paid. Listings inflate your ARV; closed sales ground it in reality.
Ignoring condition differences between your comp and your property. If a comp sold with a full gut renovation and yours will have a mid-range cosmetic rehab, the properties are not equivalent at exit. Adjust your ARV estimate down to reflect your actual finish level.
Cherry-picking the high comp. Using the highest sale in a three-comp set as your ARV target is optimism dressed as analysis. Use the average. If one comp is significantly higher than the others, note it as a potential outlier and confirm whether the gap is justified by lot size, finishes, or a feature your property lacks.
Pulling comps across a neighborhood boundary. Comparable sales from the other side of a railroad track, a major arterial, or a school district line may not be valid comps for your property. Micro-market quality can shift block by block. Confirm that your comps are in the same effective submarket, not just within a geographic radius.
Treating ARV as a contract. ARV is a projection based on what has happened, not a guarantee of what will happen. Markets move. Rehabs take longer than planned. Sale timelines vary. Build your margin into the purchase price; do not build it into an assumption that conditions will hold.
How ProPilot Helps You Verify ARV
Running ARV from MLS comps answers the exit value question. For flippers, the next step is plugging that number into a fix and flip calculator to model total project profit after all costs. For BRRRR deals or long-term holds, the analysis extends further: monthly cash flow, DSCR ratio at the refinanced loan balance, and how the deal performs across a 5-year hold period.
ProPilot's deal calculator handles both. Enter your ARV, rehab cost, purchase price, and target rent, and it projects your DSCR against live rent comp data for the zip code. Before you make an offer or pick up the phone with a lender, you know whether the deal works at both the acquisition stage and the long-term hold stage.
Frequently Asked Questions
What does ARV mean in real estate?
ARV stands for After Repair Value. It is the estimated market value of a property after all planned renovations are complete, calculated from comparable sales of recently sold, fully updated properties in the same neighborhood. Investors calculate ARV before purchasing to determine the maximum price they can pay, set the rehab budget ceiling, and evaluate whether the deal generates enough margin to proceed. It is a pre-purchase projection, not a formal appraisal.
How do you calculate ARV?
Pull 3 to 6 closed sales of comparable properties from the last 90 days, within a half mile, in the same configuration and finish condition your renovated property will be in at exit. Average the sold prices. Apply a 5 to 10 percent conservative buffer for market variance and exit timing. The result is your working ARV. This is the same comp methodology a licensed appraiser uses on the 1007 rent schedule required for DSCR refinance loans.
What is the 70% rule for ARV?
The 70% rule says your maximum purchase price should equal 70 percent of ARV minus your estimated rehab cost: Max Price = (ARV x 0.70) - Rehab Cost. The 30 percent gap covers selling costs, holding and financing costs, and your target profit margin. In strong demand markets, investors sometimes stretch to 75 percent. In slower markets, 65 percent preserves margin better. The 70% rule is a starting filter, not a fixed ceiling.
Is ARV the same as an appraised value?
Not exactly. ARV is a pre-purchase estimate you calculate yourself from comparable sales before buying or renovating. An appraisal is a formal opinion of value completed by a licensed appraiser after renovation is done, required by lenders to fund a refinance. When you order a refi appraisal at the end of a BRRRR project, the appraiser performs a formal version of the same comp analysis. If your ARV calculation was accurate, the appraised value should land close to your estimate.
Planning your first flip and want to see how ARV fits into the full project from offer to closing table? The how to flip a house guide walks through the complete process, including how the 70% rule and rehab budget connect to every decision in the deal.