Note: This article is for general education on real estate investment analysis and is not financial advice. Renovation costs, comparable sales, and financing terms vary widely by market and by lender. Always verify numbers with a licensed appraiser, a qualified contractor, and your lender before committing capital to a deal.
After Repair Value, usually shortened to ARV, is the single most important number in a fix-and-flip or BRRRR (Buy, Rehab, Rent, Refinance, Repeat) deal. Every other decision in the deal, what you offer for the property, how much you budget for renovation, and how much a lender will let you borrow, flows from this one estimate. Get it wrong and a deal that looked profitable on paper can quietly lose money from the day you close.
This guide walks through how experienced investors actually calculate ARV, why the common "70 percent rule" is a screening tool rather than a valuation method, the mistakes that most often throw off an ARV estimate, and how that number feeds directly into hard money and DSCR refinance financing.
What After Repair Value actually measures
ARV is an estimate of what a property will be worth on the open market once renovations are complete, based on what similar renovated properties in the same area have actually sold for. It is not the price you paid, it is not your renovation budget added to your purchase price, and it is not an appraisal of the property in its current, unrenovated condition.
The distinction matters because a common beginner mistake is to calculate ARV as purchase price plus rehab cost. That formula tells you your cost basis, not what the market will pay. A property can absorb 60,000 dollars in renovation and only gain 40,000 dollars in market value if the neighborhood ceiling is low, or it can gain far more than the renovation cost in a market where comparable renovated homes are trading well above what unrenovated ones sell for. ARV has to be grounded in real comparable sales, not in your own spending.
The core method: comparable sales analysis
The standard approach to estimating ARV mirrors how a licensed appraiser values a property, using comparable sales, commonly called comps.
Finding comps that actually compare
A usable comp meets several criteria at once. It should be:
- Located within roughly half a mile to one mile of the subject property, and ideally within the same school district and neighborhood boundary, since these affect buyer perception even when square footage and layout match.
- Sold within the last three to six months. Older sales do not reflect current market conditions, especially in a market where prices are moving quickly in either direction.
- Similar in size, generally within 10 to 20 percent of the subject property's square footage.
- Similar in bedroom and bathroom count, lot size, and property type (a single-family comp should not be used to value a duplex, and vice versa).
- Already renovated to a comparable finish level, not a property that sold in poor condition, since you are estimating the value of the finished product, not the as-is value.
Pull comps from the multiple listing service if you or your agent has access, or from public records and sites like Zillow research or Rentometer as a secondary check. Aim for at least three usable comps, and five or six when you can find them. A single comp, however good it looks, is not a reliable basis for a six-figure decision.
Adjusting comps for condition, size, and features
Real comps are rarely identical to your subject property, so each one needs adjustment, upward or downward, for the differences. Common adjustment categories include:
- Square footage, typically valued on a per-square-foot basis derived from the local market.
- Bedroom and bathroom count, since an extra bedroom or bathroom carries a fairly consistent dollar value in most markets.
- Lot size and outdoor features such as a garage, deck, or fenced yard.
- Finish level and age of major systems, since a comp with a brand new roof and HVAC system should be adjusted downward relative to a subject property where you are only doing cosmetic work, and adjusted upward in the reverse case.
- Unique features, such as a finished basement, an in-law suite, or a pool, that the comp has and the subject does not, or the reverse.
After adjusting each comp individually, look at the adjusted range rather than a simple average. If your comps cluster tightly after adjustment, you have a strong ARV estimate. If they are scattered widely, that scatter itself is a signal that your comp selection needs more work, not that you should simply average the noise away.
Using the 70 percent rule as a screening heuristic, and its limits
Common investor practice uses a shorthand called the 70 percent rule to quickly screen whether a deal is worth deeper analysis:
Maximum Allowable Offer = (ARV x 0.70) - Estimated Repair Costs
For example, if a property's ARV is estimated at 280,000 dollars and the renovation budget is 45,000 dollars, the maximum allowable offer under this rule is (280,000 x 0.70) - 45,000, which equals 151,000 dollars.
The remaining 30 percent of ARV is meant to cover the investor's profit margin along with the costs the formula does not otherwise capture: financing costs, closing costs on both the purchase and the resale, real estate agent commissions, and the holding costs incurred while the property is under renovation.
The 70 percent rule is useful for a first-pass screen precisely because it is fast, but it should never be the final word on an offer. Its limits include the following.
It uses a single fixed percentage across very different markets. A 70 percent margin that comfortably covers costs in a market with low property taxes and cheap financing may be too thin in a high-cost market with high transfer taxes and slower typical resale timelines. Some investors use 65 percent in expensive coastal markets and closer to 75 percent in fast-moving, lower-cost markets.
It assumes a fairly standard renovation scope. A light cosmetic rehab and a full gut renovation with structural work carry very different risk profiles, and the rule does not distinguish between them.
It is a screening tool, not a substitute for a full pro forma. Before making an offer, run an itemized budget: acquisition costs, renovation costs with a contingency, holding costs for the expected renovation and sale timeline, financing costs, selling costs, and target profit, then check that the resulting maximum offer aligns with what the 70 percent rule suggested.
Common mistakes that throw off an ARV estimate
Over-relying on a single comp. A single strong comp can make a marginal deal look attractive on paper. Always cross-check against at least two or three additional comps before finalizing a number.
Using stale or out-of-area comps. A comp from eight months ago, or one three miles away in a different school district, does not reflect the value of the property you are actually evaluating today.
Ignoring holding costs. Property taxes, insurance, utilities, loan interest, and HOA dues accrue every month a property sits unsold or unrented. A renovation that runs two months longer than planned can erase a meaningful share of expected profit even when the ARV estimate itself was accurate.
Underestimating the renovation scope. Investors frequently discover unbudgeted issues once walls are opened, such as outdated electrical panels, plumbing that needs replacement, or foundation work. A contingency of 10 to 20 percent on top of the initial renovation budget is common practice to absorb this risk.
Confusing list price with sale price when selecting comps. Only closed, recorded sales should be used as comps. Active listings and pending sales show what sellers are asking, not what buyers are actually paying.
Ignoring the appraisal gap. The ARV you calculate and the value an independent appraiser assigns during refinancing do not always match. Appraisers use their own comp selection and adjustment process, and a conservative appraisal can undercut a refinance that was planned around a higher self-calculated ARV.
How ARV drives financing decisions
ARV is not just a profitability check. It directly determines how much a lender will let an investor borrow at two distinct points in a deal.
Hard money loans for the acquisition and renovation phase are commonly sized as a percentage of ARV rather than purchase price alone, often in the range of 65 to 75 percent of ARV, referred to as loan-to-ARV, in addition to or instead of a loan-to-cost calculation. A conservative ARV estimate protects both the lender and the borrower from over-leveraging a deal that turns out to be worth less than projected.
For BRRRR investors, the refinance step depends even more heavily on ARV. After renovations are complete and, in many BRRRR strategies, after the property has been rented for a seasoning period the lender requires, the investor refinances out of the short-term hard money loan into a longer-term loan, frequently a Debt Service Coverage Ratio (DSCR) loan that qualifies based on the property's rental income rather than the borrower's personal income. That new loan amount is based on either the appraised value at refinance or the original purchase price, depending on lender policy and how much time has passed, with many lenders applying a seasoning period before they will lend against the new, higher appraised value rather than the purchase price. This is why an accurate ARV estimate at acquisition matters even months later. It determines whether the investor can pull enough capital back out of the deal at refinance to fund the next acquisition, which is the core mechanic that makes the BRRRR strategy repeatable.
A worked example
Consider a single-family property purchased for 150,000 dollars. After pulling five comps within a half mile, all sold in the last four months and adjusted for size, bedroom count, and finish level, the adjusted comps cluster between 275,000 and 285,000 dollars, supporting an ARV estimate of 280,000 dollars. The renovation budget, including a 15 percent contingency, comes to 45,000 dollars.
Applying the 70 percent rule: (280,000 x 0.70) - 45,000 = 151,000 dollars maximum allowable offer. At a 150,000 dollar purchase price, the deal clears the screen with a narrow margin, which signals that a full itemized pro forma, including holding costs and financing costs, is worth building before moving forward, rather than treating the initial screen as a green light on its own.
What to Do Next
Getting the ARV, the offer, and the financing structure right is only the first half of a fix-and-flip or BRRRR deal. Once the property closes, and especially once it converts into a held rental under the BRRRR model, the investor still has to run it like a business: tracking every renovation-adjacent and ongoing operating expense correctly for tax time, keeping lease and tenant records organized in one place, and producing clean financial reports whenever an accountant, a lender, or a DSCR refinance underwriter asks for them.
Shuk supports that operating phase directly. Schedule E-aligned expense tracking with digital receipts keeps renovation-period and ongoing operating expenses organized and categorized correctly as they happen, rather than reconstructed at tax time. Ten built-in exportable reports, including Profit and Loss, Rent Roll, and Expense Tracker, give an investor or their accountant the documentation a DSCR lender, a partner, or the IRS is likely to ask for, without manually rebuilding a spreadsheet. Centralized lease and portfolio records keep every renter's lease, contact information, and payment history in one place from the day the property starts renting. White Glove Onboarding, where Shuk's team builds out the account from an investor's existing leases and tenant list at no additional cost, means a newly acquired BRRRR or flip-to-rent property can be fully set up in the system within days of closing rather than weeks.
At as low as $2 per unit per month, with no setup fees and no contract, and with White Glove Onboarding included at no additional cost, Shuk makes running a newly acquired BRRRR or flip-to-rent property like a real business from day one feasible for landlords and property managers running 1 to 100 units.
Book a demo at shukrentals.com/book-a-demo to see how Schedule E-aligned expense tracking, the exportable report suite, and centralized lease records work together so your next acquisition is operationally ready the day you close.
