How to calculate after repair value
After repair value is what a property should sell for once renovated. It is estimated from recent sales of similar renovated homes nearby.
The formula
ARV = average price per square foot of comparable sales × square feet of your property
Worked example
Three renovated comparables sold at an average of $180 per square foot. A 1,600 square foot house has an ARV of $288,000.
How to use this calculator
Enter the home size and the comparable sold price per square foot. The ARV calculator multiplies them to estimate the after repair value. Use closed sales of renovated homes, not homes still on the market. Then enter the repair costs and the offer rule, which is 70% for the standard rule, to see the maximum offer.
What the result means
ARV is an estimate of a future sale price, not an appraisal and not what the house is worth today. It assumes your renovation brings the house up to the same standard as the comparables. Treat it as the middle of a range, and test your deal at a lower value too.
More examples
Finding the average
Here is how three sales could produce the $180 average in the worked example.
| Comparable | Sale price | Size | Price per sq ft |
|---|---|---|---|
| A | $258,000 | 1,500 sq ft | $172 |
| B | $297,000 | 1,650 sq ft | $180 |
| C | $319,600 | 1,700 sq ft | $188 |
($172 + $180 + $188) ÷ 3 = $180 per square foot.
The three sales range from $172 to $188 per square foot. Applied to the 1,600 square foot house, that is a range of $275,200 to $300,800.
From ARV to a maximum offer
The 70% rule sets the maximum offer at 70% of ARV minus repairs. With $40,000 of repairs on the 1,600 square foot house:
| Price per sq ft | ARV | Maximum offer |
|---|---|---|
| $170 | $272,000 | $150,400 |
| $180 | $288,000 | $161,600 |
| $190 | $304,000 | $172,800 |
A $10 change in price per square foot moves the ARV by $16,000 and the maximum offer by $11,200.
Sizing a refinance
For a BRRRR deal, a lender offering 75% of a $288,000 value would lend $216,000.
A larger house
At the same $180 per square foot, a 2,000 square foot house has an ARV of $360,000. With $55,000 of repairs, the 70% rule gives a maximum offer of $252,000 − $55,000 = $197,000.
What changes the result
- Choice of comparables. One unusually high or low sale shifts the average.
- Square footage. Use the same measure the comparables use. Finished basements and garages are often counted differently.
- Finish level. If your renovation is plainer than the comparables, expect a lower price per square foot.
- Timing. Prices can move between the day you estimate and the day you sell.
Common mistakes
- Using asking prices of homes still for sale instead of closed sales.
- Using comparables that were not renovated.
- Picking only the highest sales to make a deal work.
- Comparing homes of very different sizes. Smaller homes often sell for more per square foot than larger ones.
- Skipping the repair budget when turning ARV into an offer.
Related calculators
Work out each comparable’s rate with the price per square foot calculator. Budget the work with the renovation cost calculator. If you plan to keep the property, the BRRRR calculator uses your ARV to size the refinance. Results are estimates.
Frequently asked questions
What makes a good comparable?
Sold in the last three to six months, within about a mile, and similar in size, age and style.
How many comparables do I need?
At least three.
How is ARV used?
To set a maximum offer with the 70% rule and to size a BRRRR refinance.
Is ARV the same as an appraisal?
No. ARV is your own estimate of the value after the work is done. An appraisal is a professional opinion of value, and a lender relies on the appraisal.
What is the difference between ARV and as-is value?
As-is value is what the property is worth in its current condition. ARV is what it should be worth after the renovation.
Should I use listing prices as comparables?
No. Use sold prices. A listing shows what a seller hopes for, not what a buyer paid.