ARV Calculator — After-Repair Value for House Flippers

ARV comes from comparable sales: recently sold properties similar to what yours will be after renovation. The discipline is in what counts as comparable.

The working standard is sold within the last three to six months, within about half a mile in a suburban market and much closer in a city, similar square footage within roughly 20%, the same bedroom and bathroom count, and a similar level of finish.

Two errors dominate. The first is using listing prices rather than sold prices — asking is an aspiration, sold is a fact, and in a slowing market the gap between them widens exactly when you can least afford the error.

The second is comping against a superior finish. If your rehab is a solid mid-market refresh and your comps are full gut renovations with new kitchens and bathrooms, your ARV is too high. Renovation quality has to match.

Beware also of the single high comp. One property that sold well above the cluster is usually explained by something you cannot replicate — a larger lot, a view, an unusual buyer. Use the middle of the range, not the top of it.

A real appraisal or a broker price opinion costs a few hundred dollars and is worth buying on any deal where the margin is thin. It is the cheapest insurance in the whole process.

The 30% is not arbitrary. It is roughly what the transaction costs, plus enough margin to survive an ARV estimate that turns out 5% optimistic — which is a normal outcome rather than a disaster.

Holding costs accrue every month whether or not work is happening, and on a financed deal they are substantial. At $2,000 a month, a project that runs three months over budget has lost $6,000 before anything else goes wrong.

The schedule slips for predictable reasons: permits take longer than expected, a specialist trade is booked out, a material is back-ordered, an inspection fails. None of these is unusual and all of them cost the same money.

The market can move too. A flip bought in a rising market and sold nine months later into a flat one loses the appreciation the plan assumed. This is why short timelines are a risk control and not merely an efficiency.

It is also why the annualised return matters more than the headline. A 20% return in four months is an excellent use of capital; the same 20% over eighteen months is mediocre, and you carried the risk for four times as long.

The 70% rule is a screening heuristic, not an appraisal, and it has known failure modes.

In expensive markets it is too conservative. On a $1.2 million ARV, 30% is $360,000 of reserved margin — far more than the transaction actually costs. Experienced operators in high-price markets often work to a fixed profit target instead, or use 75% to 80%.

In cheap markets it is not conservative enough. On a $90,000 ARV, 30% is $27,000, and fixed costs do not scale down proportionally: the title work, the inspection and the permit fees cost roughly the same as on a house worth four times as much.

It also assumes a normal renovation. A structural rebuild, a foundation repair or anything requiring a change of use carries risk the multiplier was never meant to price.

And it says nothing about whether the property will sell. A house on a busy road, backing onto a commercial site, or in a school district buyers avoid can be a perfect deal on paper and sit on the market for months.

ARV —

after-repair value — the estimated sale price once the renovation is complete.

MAO —

maximum allowable offer — the most you can pay and still hit the rule.

Hard money —

short-term asset-backed lending, typically 8–15% with 2–4 points, underwritten on the property rather than on you.

Points —

an upfront fee of 1% of the loan each. Three points on $200,000 is $6,000 paid at closing.

Holding costs —

everything that accrues monthly while you own it: interest, taxes, insurance, utilities, security.

Return on cost —

profit over total project cost. Distinct from cash-on-cash, which measures profit over the cash you personally put in.