Estimating After-Repair Value (ARV) – A Guide for Flippers to Price the Deal Right

When it comes to house flipping, the difference between a winning deal and a costly mistake often comes down to one number: After-Repair Value (ARV). Think of ARV as your compass—it points you toward the potential profit margin and helps you avoid heading off-course into risky territory.

But here’s the challenge: estimating ARV isn’t just about guesswork or relying on “gut feel.” Successful investors treat it like a science, combining data, market knowledge, and practical judgment. Let’s break down how you can sharpen your ARV estimates and price your next deal with confidence.

What is ARV, and Why Does It Matter?

ARV is the projected value of a property after all renovations are completed and it’s in top market condition. It’s not what the property is worth today—it’s what you expect it to be worth tomorrow, once you’ve invested in repairs and improvements.

For flippers, ARV is critical because:

• It determines your maximum purchase price.

• It helps you estimate profit potential after renovation and resale costs.

• It guides financing, since lenders often base loans on ARV.

  
  

As one seasoned investor puts it, “You don’t make money when you sell, you make money when you buy.” And the only way to know if you’re buying right is by getting ARV right.

How to Estimate ARV Accurately

1. Study Comparable Sales (The “Comps”)

Your best tool for ARV is looking at what similar properties—same size, age, condition, and location—have recently sold for. Ideally, comps should be within:

• ½ mile of the property (urban) or 1–3 miles (suburban/rural).

• The last 3–6 months of sales.

• Similar property type (single-family vs. condo vs. duplex).

Think of comps as the “report cards” of your market—they tell you what buyers are actually willing to pay.

2. Adjust for Differences

No two properties are identical, so adjustments are necessary. If your target property will have a new kitchen and finished basement while a comp does not, you can reasonably add value to your ARV estimate. Similarly, if your property has fewer bathrooms or is on a less desirable street, you’ll need to subtract value.

Pro tip: Be conservative—overestimating ARV is the fastest way to erase your profit.

3. Consult Local Experts

Real estate agents, appraisers, and contractors can provide insights into how much buyers in your area value upgrades. For example, a finished basement might add significant value in Toronto, while in Phoenix, a pool might be the bigger selling point.

4. Factor in Market Trends

If the local market is heating up, ARV may rise by the time you finish renovations. Conversely, in a cooling market, you may need to discount expectations. Always look at inventory, days on market, and price trends before finalizing your ARV.

The 70% Rule: A Quick ARV Shortcut

Many flippers use the 70% Rule as a rule of thumb:

Maximum Purchase Price = (ARV × 70%) – Repair Costs

This leaves a margin for profit and unexpected expenses. For instance, if your ARV is $300,000 and repairs are $50,000:

• ($300,000 × 0.70) – $50,000 = $160,000That means you shouldn’t pay more than $160,000 for the property.

  
  

Common Mistakes to Avoid

• Overestimating ARV: A shiny renovation won’t magically increase neighborhood values.

• Ignoring holding costs: Mortgage payments, insurance, and utilities eat into profits.

• Using outdated comps: The market can shift quickly—always rely on the most recent sales.

  
  

Final Thoughts

Estimating ARV is both an art and a science. The more deals you analyze, the sharper your instincts will become. But remember: numbers don’t lie. By grounding your ARV in solid comps, realistic adjustments, and market awareness, you’ll give yourself the best shot at flipping profitably.

Want to test-drive ARV estimates on your own deals? Try the free WiseDoor real estate analysis tools at wisedoor.net and see how professional-grade calculators can help you run the numbers with confidence.