After Repair Value (ARV)

After Repair Value (ARV) refers to the estimated value of a property after all planned renovations and improvements have been completed. It is a critical metric in real estate investing, used to determine whether a deal is financially viable.

For investors focused on renovation-based strategies, such as fix and flip, new build, or fix and hold projects, ARV helps in evaluating project scope, calculating risk, and negotiating funding.

Importance of ARV in Investment Decisions

ARV plays a central role in assessing potential profitability. Before securing funding or committing capital, investors need to understand the projected value of the property post-repair. ARV informs multiple decisions, including:

  • How much to pay for the property

  • How much to invest in renovations

  • What kind of financing structure makes sense

  • What return on investment is realistic

Most short-term lenders base loan amounts on a percentage of the ARV, not the current property value. This makes accurate ARV estimates essential during the pre-acquisition stage.

How to Calculate After-Repair Value (ARV)

There are two common approaches to calculating ARV: the comparative method and the formula method.

1. Comparative Market Analysis (CMA)

This method uses recently sold properties (known as “comps”) that match the planned condition of the renovated asset.

To perform a CMA:

  • Look at 3–5 recently sold properties in the same area

  • Match for square footage, lot size, year built, and layout

  • Adjust prices for differences in features, finishes, or upgrades

  • Calculate the average adjusted sale price

Common Mistakes When Estimating ARV

Accurate ARV requires reliable data and realistic assumptions. These are common mistakes to avoid:

  • Using active listings instead of closed sales

  • Ignoring differences in renovation quality or layout

  • Overestimating appreciation based on market momentum

  • Failing to adjust for location-specific demand

  • Relying on automated tools without verification

Even minor misjudgments in ARV can affect financing terms and final profit margins.