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Fix & FlipJanuary 28, 2025

After Repair Value (ARV): How Lenders Use It for Fix and Flip Loans

After Repair Value (ARV) is the single most important number in a fix and flip. Here's how to calculate it, how lenders use it, and how to make sure your ARV is realistic.

What Is After Repair Value (ARV)?

After Repair Value (ARV) is the estimated market value of a property after all planned renovations are complete. It's the "end state" value — what a buyer would pay for the fully renovated home in the current market. ARV is the foundation of fix and flip underwriting because it determines the maximum loan amount.

How Lenders Use ARV

Fix and flip lenders typically lend a percentage of ARV — not a percentage of purchase price. The standard is:

  • 65-75% of ARV = maximum total loan (purchase + rehab budget)

Example: Property ARV is $400,000

  • At 70% ARV: Maximum loan =
80,000
  • If purchase price is
    • 00,000 and rehab budget is $60,000, total project cost =
    60,000
  • 60,000 ÷ $400,000 = 65% of ARV — within the lender's limit
  • The lender funds the full 60,000; investor brings minimal cash

    • How to Calculate ARV

    ARV is determined by analyzing comparable sales (comps) of similar properties that have been recently renovated and sold in the same market. This is the same methodology a real estate appraiser uses.

    The Comp Selection Criteria

    Finding Comps

    The Appraisal: How Lenders Verify ARV

    Fix and flip lenders require an "as-complete" or "subject-to" appraisal — an appraiser evaluates the property in its current condition but provides an opinion of value based on the completed renovation scope as defined in the scope of work document. This appraisal is what the lender uses as the official ARV for loan sizing.

    Your personal ARV estimate should be close to the appraiser's. If it's significantly different, the deal may not fund at the terms you expected.

    Common ARV Mistakes

    The 70% Rule: A Quick Screening Tool

    Many experienced investors use the "70% Rule" to quickly screen potential flip deals:

    Maximum Purchase Price = (ARV × 70%) − Rehab Costs

    On a $400,000 ARV property with $70,000 in rehab: max offer = ($400,000 × 0.70) − $70,000 = 80,000 − $70,000 = 10,000

    The 70% rule is a starting point, not a hard rule — your actual profit target and financing costs should calibrate the formula for your market.

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