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.
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:
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.
There are two common approaches to calculating ARV: the comparative method and the formula method.
This method uses recently sold properties (known as “comps”) that match the planned condition of the renovated asset.
To perform a CMA:
Accurate ARV requires reliable data and realistic assumptions. These are common mistakes to avoid:
Even minor misjudgments in ARV can affect financing terms and final profit margins.