ARV Calculator (After Repair Value)

The After Repair Value (ARV), or simply ARV, is the estimated market value of a property after all planned repairs and renovations are completed. It forms the basis for transactions where a property is purchased, renovated, and then resold, or for BRRRR deals (Buy, Rehab, Rent, Refinance, Repeat). The maximum price, renovation budget, and expected profit all depend on this value.

This calculator estimates the After Repair Value (ARV) using comparable data, calculates the maximum offer price based on the 70% rule and forecasts the profit, return on investment and equity of a transaction. By entering some recently closed properties with their respective areas as well as additional costs, results will be shown instantly depending on the information entered.

What is the After Repair Value?

The ARV answers the question: What will this property be worth once it's finished? Appraisers and investors estimate value in much the same way as real estate agents when they set a price for a home. That means they look at comparable homes that have recently sold in the neighborhood. The more similar those completed transactions are to your renovation project, the more reliable the estimate will be.

It is important to get the ARV exactly right in order to avoid both over- and underestimating. An overestimate can cause you to pay too much, leaving no profit after deducting renovation costs and selling expenses. An underestimate can cause you to miss out on transactions that would have been profitable. Since conventional appraisals often have a margin of error of several percent, these differences can amount to significant sums for properties worth hundreds of thousands of dollars.

A typical formula for calculating the after repair value (ARV):

The price per square foot method involves finding the average sales price per square foot for comparable properties and multiplying it by the size of the property being valued.

For each comparable property, a price per square foot is calculated by dividing the sales price by the size. These values are then averaged for all of the comparables and applied to the size of the subject property. For example, if you're analyzing a 1,500-square-foot house and find three recently renovated, similar properties in the neighborhood.

The average price per square foot is about $198.33. Multiply that by 1,500 square feet and you get an estimated sales value (ARV) of about $297,500. If there's already a valuation or the agent has created an estimate, then you can enter those values in the appropriate fields. The calculator will use those values instead of the comparable data.

The 70% rule and highest bid value

Real estate investors use the 70% rule to select deals. This rule states that the price you pay should not be more than 70 percent of the after repair value (ARV), minus the cost of repairs.

The remaining 30 percent is used as a buffer for ongoing costs, selling expenses and profit. If the ARV is $297,500 and the renovation cost is $45,000, then the highest bid value according to this rule would be approximately $163,250. The 70 percent figure is just a starting point and not legally required. In a competitive market, many investors are willing to push that percentage up to 75 or even 80 percent, even if it reduces their profit. That's why you can set the percentage yourself in this calculator.

Profit, return on investment, equity

Once the ARV and purchase price are known, the calculator will project the economics of this rehab and resale business opportunity. The total investment includes the purchase price, the rehab budget, plus ongoing costs such as interest, taxes, and insurance during the rehab period. The selling expenses are calculated as a certain percentage of the sales price, typically between 8 and 10 points, and include broker commissions, closing costs, and transfer tax. The profit is what's left over.

The return on investment is calculated by dividing the profit by the total investment. Many real estate investors who invest in rehabbing properties are looking for a return of at least 15 to 20 percent points to justify the risk and capital they have invested. A return below 10 percent points would be considered too low to justify the extra work. The new equity is the difference between the ARV and the purchase price, and it's an important number for BRRRR investors because it determines how much cash can be recovered through refinancing after rehabbing is complete. By activating the refinance options, you'll be able to determine the loan amount based on your desired loan-to-value ratio as well as the equity that you want to keep in this business.

How to pick good benchmark data:

You want to look for sold listings that were sold within the last three to six months, are about a half mile away from your property and match in size, style, number of bedrooms and bathrooms. Most importantly, they reflect the condition of the home after it was renovated, not its current state.

There are some errors that can have a greater impact on the ARV than other factors. When you search data across regional or school boundaries, homes with different sale prices may be included. If you rely too heavily on older sales data, you might miss changes in the market. Also, it is often not advisable to over-improve in this neighborhood because the maximum price buyers are willing to pay will be determined by the prices of neighboring properties regardless of the renovation expenses incurred.

This calculator is for general informational and evaluation purposes only. It does not constitute an appraisal or financial advice. Actual results may vary depending on market conditions, comparable properties, and your costs. You should always verify the After Repair Value (ARV) using local sales data and expert input before investing in a property.