Every flip rests on a guess you can’t check until the end: what the house will sell for once the work is done. That figure is the ARV, short for after-repair value, and when it’s wrong, your offer and your profit are wrong with it.
What is ARV in real estate?
ARV is the price a buyer should pay for a house in its finished state. It isn’t what the house is worth today, and it isn’t the purchase price plus the rehab, because buyers pay for the finished house, not for your receipts. Zonda’s 2025 Cost vs. Value report, published in September 2025, estimates what common remodeling projects add to a home’s sale price. Even in its top ten, a $25,096 composite deck adds $22,199 at sale, less than it cost, while a $4,672 garage door replacement adds $12,507.
Flippers use ARV to set their offer. BRRRR investors (buy, rehab, rent, refinance, repeat) use it to estimate the refinance, and this BRRRR example shows how much cash rides on the appraisal agreeing.
How do you calculate ARV?
You calculate ARV the way an appraiser values a house: from recent sales of similar homes nearby, which investors call comps. The Consumer Financial Protection Bureau says an appraiser sets a value by adjusting for the differences between your home and comparable local sales.
- Describe the finished house: bedrooms, bathrooms, square feet, parking and the level of finish.
- Find at least three sales of homes like it. For appraisals on the loans it buys, Fannie Mae asks for at least three closed sales, says sales from the last 12 months should be used, and wants them similar in site, room count, size, style and condition. Homes still for sale can back up the sales but can’t replace them.
- Put the sales on one scale. Divide each price by the home’s square feet, then multiply by your house’s finished size.
- Adjust for what’s different, such as a garage or an extra bathroom. Fannie Mae wants each adjustment to reflect how the local market reacts to that difference.
- Settle on a figure, then test a lower one.
An ARV worked out from three sales
Say you can buy a house for $190,000. After a $50,000 rehab it will have three bedrooms, two bathrooms, 1,500 square feet and no garage. Three similar homes nearby sold in the past seven months:
- Sale 1: 1,500 square feet, two bathrooms, no garage, sold two months ago for $330,000. That’s $220 a square foot, which puts this house at $330,000.
- Sale 2: 1,450 square feet, two bathrooms and a two-car garage, sold four months ago for $333,500. At its $230 a square foot, this house would be $345,000.
- Sale 3: 1,600 square feet, one bathroom, no garage, sold seven months ago for $336,000. At its $210 a square foot, this house would be $315,000.
Price per square foot can’t see a garage or count bathrooms, so three sales give three answers. Sale 1 matches on every line and is the most recent, so it carries the most weight: $330,000. Sale 2’s garage pushes its rate up, and Sale 3’s missing bathroom pulls its rate down. In this example, adjusting for both brings them close to Sale 1. Skip that step and you could be $15,000 high or low.
How much does the ARV change a flip’s profit?
A flip’s profit moves almost dollar for dollar with its ARV. You pay $190,000 with 15% down, and the loan covers the rest of the price and all of the rehab at 10% interest plus 2 points (2% of the loan, paid up front). The work and the sale take six months, holding costs such as taxes, insurance and utilities run $1,000 a month, and selling costs are 8% of the price.
| $345,000 | $330,000 | $315,000 | |
|---|---|---|---|
| Sale price | $345,000 | $330,000 | $315,000 |
| Purchase | −$190,000 | −$190,000 | −$190,000 |
| Rehab | −$50,000 | −$50,000 | −$50,000 |
| Closing costs when you buy (2%) | −$3,800 | −$3,800 | −$3,800 |
| Holding costs, 6 months at $1,000 | −$6,000 | −$6,000 | −$6,000 |
| Loan points and interest | −$14,805 | −$14,805 | −$14,805 |
| Selling costs (8% of the sale) | −$27,600 | −$26,400 | −$25,200 |
| Profit | +$52,795 | +$38,995 | +$25,195 |
These are example figures, not a forecast for any market.
Every $15,000 of ARV moves the profit by $13,800, because selling costs are the only cost that changes with the price. Your own cash is $53,105 in every column, so the return on it runs from 99% down to 47%.
The 70% rule, which caps the offer at 70% of the ARV minus the rehab, moves too. At $345,000 the cap is $191,500 and this offer passes. At $330,000 the cap is $181,000, and the same offer is $9,000 over. The rule can’t catch an ARV that’s too high, and the 70% rule, worked through shows what else it leaves out.
What ARV does this flip need to break even?
The example flip breaks even at an ARV of $287,614, which is 12.8% below the $330,000 the closest sale supports. The flip calculator’s “What breaks it” panel shows the same figure for this deal.
That cushion is thinner than it looks. A garage the house won’t have, a sale that’s too old or an asking price mistaken for a sale can each move an ARV by thousands.
Will the buyer’s appraisal agree with your ARV?
Your ARV gets checked again when you sell. If the buyer’s lender orders an appraisal, that appraiser works from closed sales too. On a loan Fannie Mae buys, the loan is measured against the lower of the sale price and the appraised value, so a low appraisal leaves a gap. The Consumer Financial Protection Bureau tells buyers they can often use a low appraisal to negotiate the price down. On this flip, each $15,000 you give up costs you $13,800.
How do you test an ARV before you make an offer?
Test the low end of your range first.
- Write down each sale you used and why it matches the finished house.
- Take your figure from the closest match, and treat the others as the range.
- Run the deal at the low edge in the flip calculator. If the profit there isn’t worth six months of work, the offer is too high.
- Compare the break-even ARV with your figure. The further below it sits, the more room you have.