📘 What is ARV (After Repair Value) in Real Estate Investing?

ARV (After Repair Value) is the estimated value of a property after it has been renovated or improved. It’s a key metric for real estate investors, especially in house flipping, BRRRR, or value-add rental strategies.

📌 When and Why ARV is Used

Investors use ARV to:

• Estimate potential profit on a flip or BRRRR project
  
• Secure funding from hard money lenders or banks
  
• Assess whether the investment is worth pursuing
  

It’s especially important before renovations begin, as it helps determine your maximum allowable offer (MAO) and how much room you have in your budget for rehab and other costs.

🧮 How ARV is Calculated

ARV is typically calculated by comparing recently sold, similar properties (called comps) in the same area and factoring in the value added by improvements.

🧾 ARV Formula:

Example: If a property was purchased for $150,000 and you plan to add $50,000 in repairs:

‍ARV = $150,000 + $50,000 = $200,000

✅ Pros

• Helps determine potential ROI before you buy
  
• Guides financing decisions and loan-to-value (LTV) ratios
  
• Allows better risk management and budgeting
  

⚠️ Cons

• ARV is an estimate, not a guarantee
  
• Can be skewed by inaccurate or outdated comparables
  

Market shifts can lower actual post-repair value