After-Repair Value (ARV): The Number Behind Every Flip

After-repair value (ARV) is the estimated market value of a property once your planned renovation is done. Investors use it to judge profit. Lenders use it to cap how much they'll lend on a Fix & Flip or New Construction loan.

Where the number comes from

ARV is built from comparable sales, or comps. You look for homes that recently sold near the subject property, with similar size, layout and age, already finished to the level you plan. Then you adjust for differences.

Good comps are usually:

• Sold, not just listed, within the last few months
• Close by, ideally in the same neighborhood
• Similar in beds, baths, square footage and lot
• Renovated to roughly the same standard as your scope

An appraiser or broker will often produce the formal number for the lender. Run your own first, so you know whether the deal works before you spend money on a report.

How investors use it

ARV is the top line of a flip budget. Subtract purchase price, rehab, financing, holding costs and selling costs, and what's left is profit. Many investors work backward from ARV to set a maximum offer.

Example: ARV is $400,000. Selling costs are about $28,000. Rehab is $65,000. Financing and holding costs are about $22,000. You want at least $40,000 profit. Your maximum purchase price is roughly $245,000. Pay more, and the profit target slips.

How lenders use it

Lenders size many renovation loans partly as a percentage of ARV. A higher, well-supported ARV can allow a larger loan, but it's rarely the only limit. Loan-to-cost (LTC) and as-is value often cap the loan too, and the lowest result usually wins.

At RSC Private Lending, Fix & Flip and New Construction loans both go up to 75% of ARV, alongside separate limits tied to the purchase price or lot and to total cost.

Keep it honest

The most common ARV mistake is choosing the single best sale in the area and calling it your comp. Lenders will pull their own. Use the middle of the range, not the top, and make sure your scope really delivers what those comps have.

What this means for you

ARV drives your offer, your profit and your loan size. Build it from solid comps, match it to your scope and stress-test it a little lower. If the deal still works, you're on firm ground.

Want to see how your ARV holds up with a lender? Send your comps and scope to RSC Private Lending for a term sheet in 24 hours. Subject to underwriting.