How do you calculate ARV?

Find recent sales of similar, fully renovated properties nearby, reduce them to a price per square foot, and apply that to your property's size. ARV is comp-driven, not cost-driven — it is what the finished property will sell for, based on what comparable finished homes actually sold for.

What is the 70% rule in real estate?

The 70% rule says an investor should pay no more than 70 percent of a property's ARV minus repair costs. On a $300,000 ARV with $40,000 of repairs, the max offer is 0.70 times $300,000 minus $40,000, or $170,000. The 30 percent margin covers financing, holding, selling costs, and profit.

What is the difference between ARV and market value?

Market value is what a property is worth in its current condition today. ARV is what it will be worth after planned renovations are complete. The gap between them, minus the cost to get there, is the value a project is trying to create.

Why is ARV important for investors?

ARV anchors the entire deal. It sets your maximum purchase price, your loan size on a rehab loan, and your projected profit. Overestimate ARV and every downstream number is wrong, which is the single most common way flips and BRRRR deals lose money.

After Repair Value (ARV): How to Calculate It

Every flip and value-add deal is a bet on one number: what the property will be worth when the work is done. That number is the after repair value, and almost every other decision — what to pay, how much to borrow, whether the project clears a profit — hangs off it. Get ARV right and the deal has a margin of safety; get it wrong and no amount of clever renovation saves it.

What ARV actually is

After repair value (ARV) is the projected market value of a property after planned renovations are complete. It is not what the property is worth today, and it is not what you will spend fixing it. It is the resale or appraised value of the finished product.

Crucially, ARV is comp-driven, not cost-driven. Spending $80,000 on a kitchen does not add $80,000 to ARV. The market sets the ceiling: a renovated property is worth what comparable renovated properties nearby have actually sold for, no matter what you poured into it.

How to calculate ARV from comps

The reliable method is the same one an appraiser uses — recent comparable sales:

Find sold comps, not listings. Pull properties that closed in the last 3 to 6 months, within roughly half a mile, similar in size, age, and type, and — this is the key — in renovated condition similar to your finished plan.
Reduce each to price per square foot. Divide each comp's sale price by its living area. A $300,000 sale at 1,500 sq ft is $200/sq ft.
Take a sensible central value. Average or, better, use the median of your best three to five comps to get a defensible per-foot figure.
Apply it to your property. Multiply that per-foot value by your property's square footage.

A worked example: your best comps cluster around $200/sq ft, and your property is 1,500 sq ft.

ARV = $200 × 1,500 = $300,000

Adjust for obvious differences — a comp with a garage or an extra bath is not a clean match — but resist the urge to hand-wave your way to a higher number. The comps are the evidence; your optimism is not.

The 70% rule: turning ARV into a max offer

Investors use ARV to set the most they can pay. The common shorthand is the 70% rule:

Max Offer = (ARV × 0.70) − Repair Costs

On our $300,000 ARV with $40,000 of planned repairs:

($300,000 × 0.70) − $40,000 = $210,000 − $40,000 = $170,000

The 30% haircut is not profit — it is the buffer that absorbs financing, holding costs, agent commissions, closing costs on both ends, and your actual margin. Pay much above the 70%-rule number and you are funding those costs out of your own profit. In hot markets investors sometimes stretch to 75%, but every point above 70% is margin you are giving away to win the deal.

Where ARV estimates go wrong

The same handful of mistakes account for most blown projects:

Using listing prices instead of closed sales. Asking prices are hopes; closed prices are facts. Comp to what sold.
Reaching for stale or distant comps. A sale from a year ago or the next neighborhood over is a different market. Tighten the radius and the timeframe before you widen them.
Confusing cost with value. Over-improving for the block — the $80,000 kitchen in a $250,000 neighborhood — buys you almost nothing in ARV.
Ignoring condition. Comping your finished plan against other renovated homes is right; comping it against tired, original-condition sales understates ARV and against luxury rehabs overstates it.

If you plan to hold and rent the finished property instead of selling, run the rental numbers too — the cap rate at your ARV and rent tells you whether the stabilized deal makes sense, and the full rental analysis ties ARV, income, and financing together.

The takeaway

ARV is the finished value of a property after renovations, estimated from recent sold comps reduced to a price per square foot. Anchor your maximum offer to it with the 70% rule, build your numbers from comps rather than from what you hope to spend, and treat a conservative ARV as cheap insurance. The deal is only as honest as this one number.

When a value-add project becomes part of a larger portfolio, tracking projected ARV against actual renovation spend and stabilized value is where Portfoliq's capital planning earns its keep — so the bet you made going in stays visible all the way through.