How to Calculate ARV: Comps, Formula and Worked Example

To calculate ARV (after repair value), find three to six recently sold, fully renovated homes that closely match your property, work out their average price per square foot after adjustments, and multiply that figure by your property's square footage. The result is an estimate of what the property should sell for once the work is finished. It is not a measurement, and the quality of your comps decides whether the number holds up.

This guide walks through the method step by step, with a worked example, the mistakes that inflate ARV, and how to present the number so a lender takes it seriously.

TL;DR

• ARV is the expected sale price after renovation. Build it from sold, renovated comps, not from list prices or the as-is value plus repair costs.
• The workable formula: average price per square foot of adjusted comps multiplied by your property's square footage.
• The 70% rule turns ARV into a maximum offer: (ARV × 70%) minus estimated repairs. The other 30% is not profit; it has to cover holding, financing, closing and contingency costs.
• Choose comps by similarity and the fewest adjustments, not just by distance or recency.
• Brokers who show their comps and assumptions up front get fewer valuation pushbacks from lenders.

Table of Contents

• What ARV means and what it does not
• Step 1: Pull the right comparable sales
• Step 2: Adjust for differences and concessions
• Step 3: Apply the formula
• Step 4: Turn ARV into a maximum offer with the 70% rule
• Step 5: Stress-test the number
• Common mistakes that inflate ARV
• How lenders use ARV, and why it matters to brokers
• Our perspective: ARV is an argument, not an answer
• Where BrokersConnect fits
• Building ARV into your deal workflow
• FAQ
• Sources

What ARV means and what it does not

ARV is the price a property should sell for after planned repairs, based on what similar renovated properties nearby have recently sold for. It is not the current as-is value, and it is not simply the purchase price plus what you spend on the rehab. One common textbook formulation adds the value created by repairs to the purchase price, which is a fine way to describe the concept. But a rehab budget does not create value dollar for dollar. A $60,000 renovation can add much more or much less than $60,000 depending on the market, so the market, through comps, has to tell you the answer.

That is why experienced investors and brokers treat ARV as a market-derived estimate. Free online calculators are useful for screening, but they only multiply what you feed them. If you enter weak comps, you get a confident-looking wrong number.

Step 1: Pull the right comparable sales

Everything depends on this step. For a benchmark of what "right" looks like, look at how appraisers are held to account. Fannie Mae's Selling Guide says that an appraisal must use at least three closed comparable sales to establish market value, with sales within the last 12 months preferred. Older sales are acceptable only when the appraiser explains why they are needed, such as in a rural market with little recent activity. You are not writing a mortgage appraisal, but the standard is a sensible target for your own comp set.

Filter for these characteristics:

• Sold, not listed. Asking prices are wishes. Closed sales are evidence.
• Renovated to the finish level you plan. If your plan is a mid-grade rehab, a luxury gut renovation two streets over is the wrong comp. So is an untouched estate sale.
• Same property type and similar size. Match bedrooms, bathrooms, square footage, lot size, garage and age as closely as you can.
• Recent. Aim for the last six months where the market is active, and the last 12 at most, per the benchmark above.
• Same market area. This is where distance filters mislead.

Why distance alone is a poor filter

The Appraisal Foundation's guidance on comparable properties says that comps should be chosen for physical and legal similarity, and that boundaries such as school districts, major highways and distinct neighborhoods can create real value differences even between properties that sit close together. A sale half a mile away across a highway can be a worse comp than one a mile away in the same neighborhood. Draw your comp radius around the market, not around a circle on a map.

The best comp is the one needing the fewest adjustments

Fannie Mae analysts make the point in their Appraiser Update that the best comparable is not always the most recent. It is the one that requires the fewest adjustments. A five-month-old sale of a nearly identical home beats a one-month-old sale of a house with a different layout, a pool and a bigger lot.

Step 2: Adjust for differences and concessions

No comp is a twin of your subject property. Adjust each comp up or down for meaningful differences: extra bedroom, finished basement, garage, lot size, condition, and the date of sale in a moving market. Add to a comp that is inferior to your subject, subtract from one that is superior.

Two habits keep your adjustments honest:

1. Reflect what the market pays, not a rule of thumb. The same Fannie Mae publication notes that appraisers are expected to reflect the true market reaction to differences, rather than follow arbitrary rules such as avoiding adjustments above a set percentage of price. If a comp needs a big adjustment, that is a signal to find a better comp, but do not hide the adjustment.
2. Account for seller concessions. If a seller paid the buyer's closing costs or other financing incentives, the recorded price overstates what the house was worth. The Appraiser Update says the need to make negative dollar adjustments for sales or financing concessions does not depend on how typical those concessions are in the market area. It also reports that when appraisers make these adjustments, they apply them dollar for dollar 86% of the time. Ignoring concessions quietly inflates your ARV.

Step 3: Apply the formula

The simple method most investors use:

ARV = average price per square foot of adjusted comps × subject property square footage

Some people prefer the median over the average, or give heavier weight to the closest comp. Whichever you pick, state it, and run the other as a cross-check. If the two methods differ by more than a few percent, your comp set is probably too loose.

Worked example

This is a hypothetical deal to show the arithmetic. The subject is a 1,800 square foot single-family house. You found three renovated, closed sales in the same neighborhood, already adjusted for concessions:

The average price per square foot is about $191.77. Multiply by 1,800 and you get roughly $345,180. Round down to a working ARV of $345,000. Rounding down is deliberate: a conservative ARV costs you nothing if the market cooperates, and saves you if it does not.

Notice that the larger comp has the lowest price per square foot. That is normal: price per square foot tends to fall as size rises, which is one more reason to favor comps close to your subject's size.

Step 4: Turn ARV into a maximum offer with the 70% rule

The 70% rule is a screening tool for flips. The formula is: maximum allowable offer = (ARV × 70%) minus estimated repair costs.

Using the example, with a $55,000 repair estimate:

• $345,000 × 0.70 = $241,500
• $241,500 − $55,000 = $186,500 maximum offer

The part many new investors misread: the remaining 30% is not profit. It has to pay for holding costs, loan fees, closing costs on both ends, and a contingency buffer for renovation overruns, with what is left being your margin. On a thin deal in an expensive market, 70% may be too generous. On a deal with cheap financing and a short timeline, it may be too strict. Treat it as a first filter, then build a full budget.

Step 5: Stress-test the number

Before you commit, push on the ARV:

• Drop it by 5% to 10%. If $345,000 becomes $320,000, does the deal still clear your minimum margin?
• Raise the repair budget. Rehab estimates slip more often than they shrink.
• Check the days on market of your comps. A comp that sold after four months is weaker evidence than one that sold in nine days.
• Look at active and pending listings. They show the competition you will face on your exit, even though they are not evidence of value.
• Ask whether the finish level is real. If your comps have new kitchens, refinished hardwood and fresh paint, your budget must buy the same. Floors are a good example: if you flip on Long Island, hardwood floor refinishing for flippers is one of the line items that can move a finished house into the comp bracket you are pricing against.

Common mistakes that inflate ARV

How lenders use ARV, and why it matters to brokers

On a fix-and-flip or bridge loan, ARV drives how much a lender will advance, because the loan is sized against what the property will be worth when finished. A lender will form its own view of value, typically with an appraisal or other valuation product, and it will not simply accept yours. Your number still matters, because it frames the conversation, decides which lenders are worth a call, and shows whether the deal pencils at all.

If you are a broker, a few habits help the deal move:

1. Send comps with the scenario. Include addresses, sale dates, price per square foot and photos if you have them.
2. State your adjustments. Say what you adjusted for and by how much.
3. Separate as-is value, repair budget and ARV. Lenders think in those three numbers.
4. Flag the scope. A cosmetic rehab and a structural one are different risks, and they get priced and approved differently.
5. Plan for draws and holdbacks. Rehab funds are often released in stages, which affects the borrower's cash needs. Our guide to loan holdbacks explains how they stall deals when nobody plans for them.

For a wider look at the lender side of renovation deals, see our comparison of fix and flip loans.

Our perspective: ARV is an argument, not an answer

We build software for commercial real estate brokers, and the pattern we see in loan scenarios is consistent: the deals that move are the ones where the broker can defend the value in a few lines. A bare ARV with no comps invites questions. An ARV with five clean comps, honest adjustments and a stated repair scope invites a term sheet conversation.

We would put it this way. ARV is the first claim in a chain of claims: the value will be X, the work will cost Y, the timeline is Z, so the loan is safe. Every link has to hold. If a lender finds one weak link, such as a comp across a highway or an unadjusted concession, they start doubting the others.

So we encourage brokers to do three things. First, build the comp set before you pick lenders, because the number tells you which lenders fit by leverage and loan size. Second, keep the underwriting package in one place so the comps, budget and photos travel together. Third, track which lenders respond to which deal profiles, so your next ARV-driven scenario goes to people who actually read them.

— Theron

Where BrokersConnect fits

Once you have a defensible ARV, the work shifts to finding lenders who will look at the deal. BrokersConnect is a platform for commercial real estate brokers that matches your loan scenario with verified lenders by property type, loan amount, location, leverage, credit profile, loan purpose and structure. It includes a database of 289+ verified lenders, batch lender outreach, a deal pipeline, a secure document vault for your comps and budgets, and AI tools for deal packaging. The plan costs 50 USD per month, with a free trial and no commissions or transaction fees.

Building ARV into your deal workflow

A repeatable process saves more time than any single calculator. Here is a simple one:

1. Record the subject's as-is condition, square footage and key features.
2. Pull five to six renovated, closed comps; keep the best three to five.
3. Adjust for differences and concessions, and note each adjustment.
4. Compute ARV by average and by median, then round down.
5. Run the 70% rule and a 10% downside case.
6. Attach the comps and budget to the loan scenario and send it to matched lenders.
7. Log the lender feedback, especially valuation pushback, and use it to sharpen the next comp set.

If a deal later moves into a longer hold or a refinance, your ARV work also supports the exit. Our piece on bridge-to-perm financing covers how stabilization affects the takeout. Once a loan is approved, a closing timeline keeps valuation and document requests from running late.

FAQ

How many comps do I need to calculate ARV?

Use at least three. That matches the minimum Fannie Mae requires for appraisals, and five or six give you room to discard weak ones. More comps do not help if they are poor matches, so quality beats quantity.

Is the 70% rule the same as ARV?

No. ARV is the estimated value after repairs. The 70% rule uses ARV to set a maximum offer: ARV times 70%, minus repair costs. It is a screening shortcut, and your actual costs, financing and margin may justify a different percentage.

What is the difference between ARV and as-is value?

As-is value is what the property is worth today in its current condition. ARV is what it should be worth once the planned renovation is complete. The gap between them, less the cost of the work and holding costs, is the potential profit.

Can I trust an online ARV calculator?

Use it as a screening tool. The output is only as good as the comps you enter, and automated suggestions often miss condition, finish level and market boundaries. Verify the comps yourself, and expect the lender to run its own valuation.

Sources

• Fannie Mae Selling Guide: Comparable Sales
• Fannie Mae Appraiser Update
• The Appraisal Foundation, Valuation Advisory 4: Identifying Comparable Properties
• Wall Street Prep: After-Repair Value (ARV) Formula

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