How to Calculate After Repair Value (ARV)
After Repair Value is the estimated market value of a property after renovations are complete. It is the single most consequential number in a BRRRR deal — your refinance proceeds, capital recovery, and overall returns all flow from it. Getting ARV wrong by even 10% can flip a strong deal to underwater.
The Comparable Sales Method
ARV is estimated by analyzing recent sales of similar properties in the same area that are already in the condition your property will be after rehab. These are called “comps.”
Finding Good Comps
A strong comp matches on five criteria:
- Location: Same neighborhood or immediate area. Within 0.5 miles in urban markets, 1-2 miles in suburban.
- Recency: Sold within the last 3-6 months. Older sales may not reflect current market.
- Size: Within 10-20% of your property's square footage.
- Configuration: Same bedroom/bathroom count, or close to it.
- Condition: Similar post-rehab condition. A comp in original condition is not a comp for your rehabbed property.
You need 3-5 strong comps. If you can only find 1-2, your ARV estimate has high uncertainty — and the sensitivity analysis becomes critical.
Making Adjustments
No comp is identical to your property. Appraisers make dollar adjustments for differences:
- Extra bedroom: +$5,000-$15,000 (market dependent)
- Extra bathroom: +$3,000-$10,000
- Garage vs no garage: +$10,000-$25,000
- Lot size premium: varies significantly by market
- Age/condition delta: most subjective adjustment
The adjusted comp values form a range. Your ARV estimate should be conservative within that range — use the median or below, not the highest comp.
Common ARV Mistakes
- Cherry-picking the highest comp. An appraiser won't. Use the middle of the range.
- Using listing prices instead of sold prices. Listing prices are aspirational. Sold prices are real.
- Comps from a different micro-market. Two neighborhoods 1 mile apart can have 20% price differences.
- Ignoring market direction. In a declining market, 6-month-old comps may overstate current value.
- Over-improving for the neighborhood. A $50,000 kitchen in a $150,000 neighborhood doesn't create proportional ARV increase.
Stress-Test Your ARV
Because ARV is an estimate with inherent uncertainty, you should always check what happens to your deal if the appraisal comes in 10-15% below your target. If a 10% miss flips the deal from green to red, you're too dependent on hitting a precise number.
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