After Repair Value (ARV) Calculator
This tool helps you estimate the potential value of an investment property after necessary repairs and renovations are completed. It's a key metric for house flippers and real estate investors to assess potential profitability.
Input the estimated value of comparable, recently sold, *renovated* homes in the area, along with your estimated repair costs and the property's current value.
Enter Property & Repair Details
Understanding After Repair Value (ARV)
What is ARV?
After Repair Value (ARV) is the estimated value of a property once all repairs and renovations are completed. It's determined by looking at the recent sales prices of comparable properties in the same area that have already been renovated. ARV is the key figure in determining if a property is a good investment for flipping or holding.
How ARV is Used
Real estate investors, particularly those focused on flipping houses, heavily rely on ARV. The general formula they use is a variation of the "70% Rule":
Maximum Allowable Offer (MAO) ≤ (ARV * 0.70) - Estimated Repair Costs
This rule serves as a guideline to ensure there's enough room for repair costs, holding costs, selling costs, and profit margin. The "70%" is a common starting point and can vary based on market conditions and desired profit.
Key Inputs Explained
- Value of Comparable Renovated Homes: This is the foundation of your ARV estimate. It requires researching recent sales of properties similar in size, condition (after renovation), and location.
- Estimated Repair Costs: A detailed breakdown of all costs required to get the property to its "after repair" condition, including materials and labor. Accurate estimation is crucial.
- Current Property Value (Optional): The price you pay for the property or its current "as-is" market value. While not directly used to *calculate* ARV itself, it's necessary to calculate your potential profit on the deal.
Outputs Explained
- Estimated After Repair Value (ARV): The predicted market value after renovations. Based on your Comparable Renovated Homes input.
- Estimated Potential Profit: Calculated as
ARV - Current Property Value - Estimated Repair Costs. This gives you an estimate of the gross profit before other expenses (like holding costs, closing costs, selling fees) are factored in. - Typical Maximum Allowable Offer (MAO): Calculated using the 70% rule:
(ARV * 0.70) - Estimated Repair Costs. This is a common investor guideline for the maximum price they would be willing to pay for the property.
Real-Life ARV Calculation Examples
Click on an example to see the calculation details:
Example 1: Standard Flip Scenario
Scenario: Analyzing a potential flip project.
Known Values:
- Comparable Renovated Sales: $300,000
- Estimated Repair Costs: $40,000
- Current Property Value: $180,000
Calculation:
- ARV = $300,000
- Estimated Profit = $300,000 - $180,000 - $40,000 = $80,000
- MAO (70% Rule) = ($300,000 * 0.70) - $40,000 = $210,000 - $40,000 = $170,000
Conclusion: Based on these numbers, the ARV is $300,000, with potential gross profit of $80,000. Using the 70% rule, the maximum offer would be $170,000 (which is below the current asking price in this hypothetical). An investor might need to negotiate the purchase price down.
Example 2: High ARV Potential, High Repairs
Scenario: A property needing extensive renovation but in a desirable area.
Known Values:
- Comparable Renovated Sales: $550,000
- Estimated Repair Costs: $120,000
- Current Property Value: $350,000
Calculation:
- ARV = $550,000
- Estimated Profit = $550,000 - $350,000 - $120,000 = $80,000
- MAO (70% Rule) = ($550,000 * 0.70) - $120,000 = $385,000 - $120,000 = $265,000
Conclusion: The ARV is high at $550,000, but significant repairs are needed. The potential gross profit is $80,000. The 70% rule suggests a MAO of $265,000, which is significantly below the current value, indicating this might not be a viable deal based on this rule unless the purchase price can be greatly reduced or a higher MAO percentage is used.
Example 3: Minimal Repairs
Scenario: A property in decent condition needing only cosmetic updates.
Known Values:
- Comparable Renovated Sales: $220,000
- Estimated Repair Costs: $15,000
- Current Property Value: $190,000
Calculation:
- ARV = $220,000
- Estimated Profit = $220,000 - $190,000 - $15,000 = $15,000
- MAO (70% Rule) = ($220,000 * 0.70) - $15,000 = $154,000 - $15,000 = $139,000
Conclusion: With minimal repairs, the ARV is $220,000. The estimated gross profit is lower ($15,000) compared to higher-repair deals, but the MAO of $139,000 shows that purchasing at $190,000 is well above the 70% rule guideline, suggesting this deal might only work with a different strategy or if other costs are extremely low.
Example 4: Just Estimating ARV
Scenario: A general agent or owner wants to know the *potential* market value after typical renovations.
Known Values:
- Comparable Renovated Sales: $410,000
- Estimated Repair Costs: $0 (Not needed for ARV itself, but inputting 0 is okay)
- Current Property Value: $0 (Optional input can be left blank)
Calculation:
- ARV = $410,000
- Estimated Profit = $410,000 - $0 - $0 = $410,000 (Note: This profit is meaningless without current value/repairs)
- MAO (70% Rule) = ($410,000 * 0.70) - $0 = $287,000
Conclusion: The estimated ARV is $410,000. Without current value and repair costs, profit is theoretical. The MAO gives a sense of what an investor following the 70% rule might offer based *only* on the ARV and zero repairs.
Example 5: Negative Profit / Underwater
Scenario: Analyzing a property that might not be a profitable flip.
Known Values:
- Comparable Renovated Sales: $180,000
- Estimated Repair Costs: $35,000
- Current Property Value: $160,000
Calculation:
- ARV = $180,000
- Estimated Profit = $180,000 - $160,000 - $35,000 = -$15,000
- MAO (70% Rule) = ($180,000 * 0.70) - $35,000 = $126,000 - $35,000 = $91,000
Conclusion: With an estimated gross profit of -$15,000, this deal is likely not viable for a flip based on these numbers. The MAO of $91,000 highlights how far the current value ($160,000) is from a typical investor's target purchase price for this ARV and repair cost.
Example 6: Higher MAO Percentage
Scenario: Using the tool with the understanding that the 70% rule is just a guideline and a local market might support a higher percentage (e.g., 75%). *Note: The calculator defaults to 70% MAO.*
Known Values (Input into calculator):
- Comparable Renovated Sales: $350,000
- Estimated Repair Costs: $50,000
- Current Property Value: $220,000
Calculator Output:
- ARV = $350,000
- Estimated Profit = $350,000 - $220,000 - $50,000 = $80,000
- Typical MAO (70% Rule) = ($350,000 * 0.70) - $50,000 = $245,000 - $50,000 = $195,000
Manual Calculation (Using 75% Rule):
- MAO (75% Rule) = ($350,000 * 0.75) - $50,000 = $262,500 - $50,000 = $212,500
Conclusion: The calculator provides the standard 70% MAO ($195,000). If the market supports a 75% rule, the MAO would be higher ($212,500). This shows the sensitivity of MAO to the chosen percentage and emphasizes the calculator's output as a 'typical' guideline.
Example 7: Property Acquired Off-Market (Low Current Value)
Scenario: An investor finds a distressed property directly from an owner for a very low price.
Known Values:
- Comparable Renovated Sales: $280,000
- Estimated Repair Costs: $60,000
- Current Property Value (Purchase Price): $100,000
Calculation:
- ARV = $280,000
- Estimated Profit = $280,000 - $100,000 - $60,000 = $120,000
- MAO (70% Rule) = ($280,000 * 0.70) - $60,000 = $196,000 - $60,000 = $136,000
Conclusion: Acquiring the property at a low price ($100,000) results in a high estimated gross profit ($120,000), well within the typical 70% MAO guideline ($136,000). This illustrates how finding good deals below market value is key to profitable flipping.
Example 8: Large Scale Reno
Scenario: A property needing significant structural and cosmetic work.
Known Values:
- Comparable Renovated Sales: $750,000
- Estimated Repair Costs: $250,000
- Current Property Value: $400,000
Calculation:
- ARV = $750,000
- Estimated Profit = $750,000 - $400,000 - $250,000 = $100,000
- MAO (70% Rule) = ($750,000 * 0.70) - $250,000 = $525,000 - $250,000 = $275,000
Conclusion: This represents a larger-scale project. While the estimated gross profit is healthy ($100,000), the MAO calculated by the 70% rule ($275,000) is significantly less than the current value ($400,000), suggesting this deal doesn't fit the standard 70% model at this purchase price.
Example 9: Calculating Based Purely on ARV & Repairs
Scenario: An investor wants to quickly see the MAO based *only* on ARV and repair costs, ignoring the current value initially.
Known Values (Input into calculator):
- Comparable Renovated Sales: $400,000
- Estimated Repair Costs: $70,000
- Current Property Value: $0 (Left blank)
Calculator Output:
- ARV = $400,000
- Estimated Profit = $400,000 - $0 - $70,000 = $330,000 (Theoretical profit)
- Typical MAO (70% Rule) = ($400,000 * 0.70) - $70,000 = $280,000 - $70,000 = $210,000
Conclusion: The estimated ARV is $400,000. The MAO based on the 70% rule and $70,000 in repairs is $210,000. This tells the investor they should ideally acquire the property for $210,000 or less to meet their target metrics using the 70% rule.
Example 10: Low ARV Market
Scenario: Analyzing a property in a lower-value market.
Known Values:
- Comparable Renovated Sales: $150,000
- Estimated Repair Costs: $20,000
- Current Property Value: $100,000
Calculation:
- ARV = $150,000
- Estimated Profit = $150,000 - $100,000 - $20,000 = $30,000
- MAO (70% Rule) = ($150,000 * 0.70) - $20,000 = $105,000 - $20,000 = $85,000
Conclusion: Even in lower-value markets, the principles apply. The ARV is $150,000, with an estimated gross profit of $30,000. The MAO based on the 70% rule is $85,000, indicating the current value ($100,000) is above the typical investor's purchase target for this deal profile.
Frequently Asked Questions about ARV
1. What does ARV stand for?
ARV stands for After Repair Value. It's the estimated value of a property after all planned repairs and renovations are completed.
2. How is ARV primarily determined?
ARV is primarily determined by researching and analyzing the recent sales prices of comparable properties in the same area that have already been renovated to a similar or better standard.
3. Why is ARV important for real estate investors?
ARV is crucial because it sets the potential maximum sale price. Investors use it to work backward, along with estimated repair costs and desired profit margin, to determine the maximum price they can afford to pay for the property (the Maximum Allowable Offer).
4. What are "comparable renovated homes"?
These are properties in the immediate vicinity that are similar in size, number of bedrooms/bathrooms, and features, and which have sold recently *after* undergoing renovations comparable to those planned for your property.
5. What is the "70% Rule"?
The 70% rule is a common guideline used by investors. It suggests that an investor should pay no more than 70% of the ARV of a property, minus the estimated repair costs. The formula is: MAO <= (ARV * 0.70) - Repair Costs.
6. Does the ARV Calculator include all potential costs?
No, this basic calculator focuses on ARV, estimated profit (ARV - Current Value - Repairs), and the MAO based on the 70% rule. It does not automatically include other potential costs like holding costs (utilities, taxes, insurance while renovating), closing costs (buying and selling), or selling commissions. These must be factored into a full deal analysis.
7. Is the Estimated Potential Profit shown here the final profit?
No, the Estimated Potential Profit shown is a gross profit (ARV minus acquisition cost and repair costs). Your net profit will be lower after accounting for closing costs, selling costs, holding costs, financing costs, etc.
8. Can I change the 70% rule percentage in the calculator?
This specific calculator is fixed to use the standard 70% for the MAO calculation. You would need a more advanced tool or manual calculation to use a different percentage.
9. What units should I use for input?
Use consistent currency units for all inputs (e.g., only USD, only EUR, only CAD). The results will be in the same currency units.
10. My estimated profit is negative. What does that mean?
A negative estimated potential profit means that based on your inputs, the cost to acquire the property plus the estimated cost of repairs is greater than the estimated After Repair Value. This indicates that, under these assumptions, the property is not likely to be profitable as a flip.
