Concept

ARV

What it is

ARV stands for After Repair Value. It’s what the property will sell for after it’s renovated to the target finish level — not what it’s worth today, not what Zillow says, not what the seller wants, not what an active listing near it is asking for. It’s a forward-looking number based on comparable sales of similar finished houses in the same neighborhood.

ARV is the anchor for every deal. The 70 percent rule uses it. The equity gap formula uses it. The hard money lender uses it to size the loan. The appraiser uses it at refinance. Get ARV right and the deal underwrites correctly. Get it wrong and everything downstream is garbage.

“Real estate investors are leaning on AI more and more, but can it actually price a deal, find the ARV for you?” Ross’s answer: it’s a phenomenal sidekick, great right-hand man, but you cannot give blind trust to it. It misses flood zones. It misses stale listings that disprove the valuation. You still have to know the rules and lead your organization.

Why it matters

ARV estimation is where most new flippers fail. They pull a Zillow Zestimate or look at active listings and call it done. Active listings aren’t comps. They’re aspirations. A house sitting at $225K for 90 days isn’t proof ARV is $225K. It’s proof ARV is below $225K.

Ross lost over six figures on a Denver flip because he relied too much on market appreciation projections instead of actual sold comps. He thought the house would sell for close to $800K. The most the neighborhood could support was $667,500. Oops. “It’s like serving gourmet food in a truck-stop diner. People just wanted bacon and eggs.”

Real ARV requires real comps: sold properties, within six months, within the same neighborhood as defined by census tract and major road boundaries, within similar square footage, matching bed/bath count, matching age, matching condition. Never fudge proximity — a sold comp two miles away in a different school zone is not a comp.

How it shows up

The ARV method: pull three to five sold comps from the same census tract, within the last six months, matching the bed/bath/sqft/age/style of the subject. Normalize for differences with small adjustments — a few thousand per missing bedroom, a bit less per missing bath. Drop outliers, average the rest. That’s your ARV baseline.

Then subtract from it. Max offer = ARV minus rehab minus holding costs minus closing costs minus minimum profit. On a $200K ARV with $50K rehab, $6K holding, $15K closing, and $30K minimum profit: $99K max offer. Anything above that eats profit.

Census tracts, not zip codes. There are lots of different neighborhoods inside a specific zip code. Use the census tract map. Drive the actual boundaries. Presence means everything — that’s one of the reasons to only invest in your own backyard where you know the neighborhood feel, not just the address.

One trap: the oddbird. If the subject is unusual enough that it doesn’t have good comps — weird lot, odd style, bad adjacency — ARV can’t be calculated reliably. No comps means no ARV means the deal is speculation. Walk.

70 percent rule, equity gap, comps, fudge factor, range of comps