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 flows from this one estimate. That includes what you offer for the property, how much you budget for renovation, and how much a lender will let you borrow.
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. It explains why the common "70 percent rule" is a screening tool, not a valuation method. It covers the mistakes that most often throw off an ARV estimate. It also shows 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 the work is done. It is based on what similar renovated homes in the same area have actually sold for. It is not the price you paid. It is not your rehab budget added to your purchase price. It is also not an appraisal of the property in its current state, before the work.
This matters because a common beginner mistake is to add the purchase price and rehab cost and call that ARV. That sum is your cost basis, not what the market will pay.
A property can take in 60,000 dollars in rehab work and only gain 40,000 dollars in market value. That happens if the neighborhood ceiling is low. Or it can gain far more than the rehab cost. That happens in a market where similar renovated homes sell well above ones that are not. ARV has to be based on real comparable sales, not on your own spending.
The core method: comparable sales analysis
The standard way to estimate ARV mirrors how a licensed appraiser values a property. It uses 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. Ideally it is also in the same school district and neighborhood. These shape how buyers see a home, 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 similar finish level, not a property that sold in poor condition. 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. You can also use public records and sites like Zillow research or Rentometer as a second 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 an adjustment, up or down, for the differences. Common adjustment categories include:
- Square footage, typically valued on a per-square-foot basis drawn from the local market.
- Bedroom and bathroom count, since an extra bedroom or bathroom carries a fairly steady 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. Say a comp has a brand new roof and HVAC system, and you are only doing cosmetic work on your subject property. Adjust that comp down. Adjust it up 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, look at the adjusted range, not a simple average. If your comps cluster tightly after adjustment, you have a strong ARV estimate. If they are spread widely, that spread is itself a signal. It means your choice of comps needs more work. It does not mean 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. It is a quick way to screen whether a deal is worth a deeper look:
Maximum Allowable Offer = (ARV x 0.70) - Estimated Repair Costs
For example, say 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. It also covers the costs the formula does not otherwise capture:
- Financing costs.
- Closing costs on both the purchase and the resale.
- Real estate agent commissions.
- Holding costs while the property is under renovation.
The 70 percent rule is useful for a first-pass screen because it is fast. But it should never be the final word on an offer. Its limits include the following.
It uses one fixed percentage across very different markets. A 70 percent margin may easily cover costs in a market with low property taxes and cheap financing. That same margin 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. Some use closer to 75 percent in fast-moving, lower-cost markets.
It assumes a fairly standard scope of work. A light cosmetic rehab and a full gut job with structural work carry very different risks. The rule does not tell them apart.
It is a screening tool, not a substitute for a full pro forma. Before making an offer, run an itemized budget. Include acquisition costs, renovation costs with a contingency, and holding costs for the expected renovation and sale timeline. Also include financing costs, selling costs, and target profit. Then check that the resulting maximum offer lines up with what the 70 percent rule suggested.
Common mistakes that throw off an ARV estimate
Relying too much on a single comp. One strong comp can make a borderline deal look attractive on paper. Always cross-check against at least two or three more comps before you settle on a number.
Using stale or out-of-area comps. Think of a comp from eight months ago, or one three miles away in a different school district. It 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 add up every month a property sits unsold or unrented. A renovation that runs two months longer than planned can erase a real share of expected profit. This can happen even when the ARV estimate itself was accurate.
Underestimating the scope of work. Investors often find issues they did not budget for once walls are opened. Examples include 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 picking 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 pick and adjust their own comps. A conservative appraisal can undercut a refinance that was planned around a higher ARV you calculated yourself.
How ARV drives financing decisions
ARV is not just a profit check. It directly sets how much a lender will let an investor borrow at two separate points in a deal.
Hard money loans for the acquisition and renovation phase are commonly sized as a percentage of ARV, not purchase price alone. This is often in the range of 65 to 75 percent of ARV, called loan-to-ARV. It may be used in addition to, or instead of, a loan-to-cost calculation.
A conservative ARV estimate protects both the lender and the borrower. It keeps them from over-leveraging a deal that turns out to be worth less than projected.
For BRRRR investors, the refinance step depends even more on ARV. First, renovations are completed. In many BRRRR strategies, the property is also rented for a seasoning period the lender requires. Then the investor refinances out of the short-term hard money loan into a longer-term loan. This is often a Debt Service Coverage Ratio (DSCR) loan. It qualifies based on the property's rental income, not the borrower's personal income.
That new loan amount is based on either the appraised value at refinance or the original purchase price. Which one depends on lender policy and how much time has passed. Many lenders apply a seasoning period before they will lend against the new, higher appraised value instead of the purchase price.
This is why an accurate ARV estimate at acquisition still matters months later. It decides whether the investor can pull enough capital back out of the deal at refinance to fund the next acquisition. That is the core mechanic that makes the BRRRR strategy repeatable.
A worked example
Consider a single-family property bought for 150,000 dollars. The investor pulls five comps within a half mile, all sold in the last four months. After adjusting for size, bedroom count, and finish level, the comps cluster between 275,000 and 285,000 dollars. That supports 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 by a narrow margin. That is a sign to build a full itemized pro forma before moving forward. Include holding costs and financing costs. Do not treat the first 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, the investor still has to run it like a business. This is especially true once it becomes a held rental under the BRRRR model. That means:
- Tracking every renovation-related and ongoing operating expense correctly for tax time.
- Keeping lease and tenant records organized in one place.
- 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 include Profit and Loss, Rent Roll, and Expense Tracker. They give an investor or their accountant the records a DSCR lender, a partner, or the IRS is likely to ask for, without rebuilding a spreadsheet by hand. 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 is also included. Shuk's team builds out the account from an investor's existing leases and tenant list at no additional cost. That means a newly acquired BRRRR or flip-to-rent property can be fully set up in the system within days of closing, not 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. That way, your next acquisition is ready to operate the day you close.
