After Repair Value (ARV) Calculator

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What is After Repair Value (ARV)?

After Repair Value (ARV) is a real estate investing term that represents the estimated market value of a property after all necessary repairs and improvements have been completed. It's one of the most critical metrics for house flippers, wholesalers, and buy-and-hold investors because it helps determine whether a deal is worth pursuing.

Understanding ARV allows investors to calculate potential profits, negotiate better purchase prices, and make informed decisions about renovation budgets. Without an accurate ARV estimate, you risk overpaying for a property or underestimating repair costs, both of which can turn a promising investment into a money pit.

How to Calculate After Repair Value

The basic ARV formula is straightforward:

[\text{ARV} = \text{Total Square Footage} \times \text{Price Per Square Foot}]

Where:

  • Total Square Footage is the livable area of the property in square feet.
  • Price Per Square Foot is derived from comparable sales (comps) in the same area.

For more refined estimates, you can factor in:

  • Renovation Costs that genuinely add value (not just repairs)
  • Market Adjustment Factor to account for appreciating or declining markets

Calculation Example

Let's walk through a practical example. Suppose you're evaluating a 1,800 square foot property in a neighborhood where comparable homes sell for $225 per square foot.

Step-by-Step Breakdown

  1. Determine Total Square Footage

    • The property has 1,800 square feet of livable space.

  2. Find Price Per Square Foot

    • Based on 3 recent comparable sales, the average price is $225/sq ft.

  3. Apply the Formula

[\text{ARV} = 1800 \times 225 = $405,000]

The estimated After Repair Value is $405,000.

Using the 70% Rule

Armed with your ARV, you can now apply the 70% rule to determine your maximum allowable offer (MAO):

[\text{MAO} = (\text{ARV} \times 0.70) - \text{Repair Costs}]

If repairs are estimated at $50,000:

[\text{MAO} = (405000 \times 0.70) - 50000 = $233,500]

This means you shouldn't pay more than $233,500 for the property to maintain a healthy profit margin.

Tips for Accurate ARV Estimates

Getting your ARV right is crucial. Here are some best practices:

  • Use 3-5 comparable sales from the past 6 months within 0.5 miles of the subject property
  • Match property characteristics including square footage (within 20%), bedrooms, bathrooms, and age
  • Account for market trends as values can shift significantly in hot or cooling markets
  • Consider the neighborhood as ARV can vary block by block in some areas
  • Get multiple opinions from agents, appraisers, and fellow investors

Remember, ARV is an estimate, not a guarantee. Conservative estimates protect your downside while still allowing for profitable deals.

Frequently Asked Questions

After Repair Value (ARV) is an estimate of a property's value after all repairs and renovations have been completed. It's commonly used by real estate investors to determine the potential profitability of a fix-and-flip or rental property investment.

ARV is calculated by multiplying the total square footage of a property by the price per square foot of comparable properties in the area. You can also add renovation costs and apply a market adjustment factor for more accurate estimates.

A good ARV depends on your investment strategy. Most house flippers follow the 70% rule, which states you should pay no more than 70% of the ARV minus repair costs for a property. This ensures sufficient profit margin.

Look for recently sold properties (within 3-6 months) in the same neighborhood with similar size, age, condition, and features. Real estate websites, MLS listings, and local appraisers can provide this data.