How is ARV different from current market value?

Current market value is what the property is worth today, as-is. ARV is what it would be worth after renovations bring it to market-ready condition. The gap between the two is what creates the profit opportunity in a flip — and the risk if the estimate is wrong.

How many comps do you need to estimate ARV?

Aim for at least three sold comparables within a half-mile to one mile of the subject property, sold within the past three to six months, with similar square footage (within 10–15%), similar bed and bath count, and similar lot size. In thin markets, you may have to extend the radius or timeframe, but document why.

What happens if you overestimate ARV?

If your ARV estimate is too high, every downstream calculation is wrong. Your maximum offer price goes up, your projected profit shrinks or disappears, and if you applied the 70% rule to an inflated number, you may have paid more than the deal can support. Overestimated ARV is the most common reason fix-and-flip deals fail to hit their projected return.

Can a lender's appraisal differ from my ARV estimate?

Yes, and this is a key risk. Hard money lenders and bridge lenders often order their own appraisal to validate your ARV. If their number comes in lower than yours, your loan amount may be reduced, requiring more cash to close. Never assume your own ARV estimate will match the lender's independently commissioned one.

ARV (After-Repair Value), explained

Where ARV comes from

You don’t calculate ARV from the distressed house in front of you. You read it off what comparable renovated homes actually sold for.

The process mirrors how a licensed appraiser establishes value: find recently sold homes that are similar in size, age, layout, and condition to what your property will look like after renovation. The key phrase is “after renovation.” You are not comparing to other distressed properties; you are comparing to finished, move-in-ready homes that represent your exit product.

Finding solid comps

A reliable ARV estimate rests on comps that are:

Close in location — ideally within half a mile, or within the same neighborhood or subdivision
Recent — sold within 90 to 180 days; in fast-moving markets, tighten that to 60 days
Similar in size — within 10–15% of your projected finished square footage
Similar in finish level — a mid-grade renovation comp should not be used to support a luxury renovation project

Three to five strong comps beat eight weak ones. If the only comparables you can find are in a different school district or twice the size, write down each adjustment and discount your estimate accordingly.

Why ARV drives the flip math

Every key flip metric runs through ARV.

The 70% rule sets your maximum offer as 70% of ARV minus estimated repair costs. If you inflate ARV by $30,000, your maximum offer goes up by $21,000. You may win the deal — but you’ve bought yourself a tighter (or negative) margin.

Holding costs, closing costs, and carrying time all eat into the spread between your total investment (purchase + rehab + holding) and ARV. A thin spread leaves no room for cost overruns, which are nearly universal in renovation projects.

A worked ARV example

A distressed three-bedroom, two-bath home is listed at $140,000. After researching recent sales:

Comparable	Sale price	Sq ft	Condition
Comp A	$238,000	1,420 sq ft	Fully renovated
Comp B	$227,000	1,380 sq ft	Updated kitchen/baths
Comp C	$245,000	1,510 sq ft	Fully renovated

The subject will be approximately 1,400 sq ft after renovation. An adjusted ARV of $230,000–$235,000 is reasonable given the comp set.

With $45,000 in estimated repairs: Maximum offer (70% rule) = ($232,500 × 0.70) − $45,000 = $162,750 − $45,000 = $117,750

If the asking price is $140,000, the deal doesn’t pencil at the 70% threshold. The investor must either negotiate the price down, reduce scope and cost of repairs, or pass.

The most common ARV mistakes

Averaging asking prices instead of closed sales. List prices reflect seller hope, not market reality. Only closed sales count.

Using unupdated comps as the baseline. If the comps that sold were also renovated, your ARV is correct. If you are comparing to as-is homes and projecting a premium nobody has actually paid, that ARV is fiction.

Ignoring neighborhood ceiling. Every neighborhood has a price ceiling — the point above which buyers choose a different area. A $75,000 renovation on a $150,000 ARV property in a $200,000 neighborhood rarely produces $225,000. You will not sell a $225,000 house on a $200,000 street, no matter what you spend.

Scope creep. Adding features during renovation (a deck, a bathroom, an ADU) that weren’t in the original ARV estimate doesn’t automatically raise your ARV dollar-for-dollar. Check comps first.

When you are unsure, anchor ARV to recent, nearby, genuinely comparable sales, and discount anything you cannot back up with a comp.

General information for real estate investors, not financial, legal, or tax advice. Specific thresholds and terms vary by lender, market, and program; confirm the numbers that apply to you with the relevant professional.