How to calculate ARV for a flip
By Austin Frangoules | Updated | 6 min read
To calculate ARV, find three to six recent sales of renovated homes like yours nearby, adjust each sale price for the differences, then reconcile the adjusted prices into one number. A safe default is the lower of the weighted average and the median of the adjusted prices.
What ARV is and why it decides the deal
ARV, or after repair value, is what the house should sell for once the work is done. It sits at the top of every flip and BRRRR calculation. Your max offer, your loan size, your profit and your refi all start from it.
That makes ARV the most expensive number to get wrong. On a $335,000 flip, a 10% ARV miss is $33,500 of lost sale price, and almost none of your costs go down with it. A good ARV is not a guess or an online estimate. It is a short, documented argument built from comps that anyone can check.
Step 1: Pull the right comps
A comp is a closed, arm's-length sale of a similar home near yours. For ARV you want sales of homes in the condition yours will be in after the rehab, which usually means renovated or well kept. Start tight and widen one filter at a time until you have at least three, and aim for five or six.
| Filter | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|
| Distance | 0.5 mile | 1 mile | 2 miles (5 in rural areas) |
| Sold within | 90 days | 180 days | 365 days |
| Living area | Within 15% | Within 20% | Within 30% |
| Year built | Within 10 years | Within 20 years | Any |
| Bedrooms | Within 1 | Within 1 | Within 2 |
| Condition | Renovated or average | Add dated | Any |
Leave out foreclosures, short sales and sales between relatives. They do not show what a normal buyer pays. Also watch for neighborhood boundaries. A comp across a highway, a waterway, a school zone line or a city line can sell for a very different price even when it looks identical on paper.
Step 2: Adjust each comp toward your house
No comp is a perfect match. You adjust each sale price to answer one question: what would this comp have sold for if it were exactly like my house after the rehab? If the comp is worse than your house, add value. If it is better, subtract.
| Feature | Default adjustment |
|---|---|
| Time | 0.25% of the sale price per month since it sold |
| Living area | Square foot difference x 40% of the median price per square foot of the comps |
| Bedroom | $5,000, only when size is within 5% so the area adjustment does not already cover it |
| Full bath / half bath | $8,000 / $4,000 |
| Garage | $8,000 per bay |
| Condition | 7% of the sale price per condition step |
| Seller concessions | Subtract the part above a normal 3% of price |
Why only 40% of the price per square foot for size? Because the land, the kitchen and the baths are already in the price. An extra 100 square feet of bedroom does not add a full average square foot of value. Appraisers use a fraction for the same reason.
- Comp sale price, 1,400 sqft, 1.5 baths, sold 4 months ago
- $310,000
- Time: 4 months x 0.25% x $310,000
- +$3,100
- Size: subject is 100 sqft larger x $84 per sqft (40% of a $210 median)
- +$8,400
- Baths: subject has a second full bath instead of a half bath ($8,000 minus $4,000)
- +$4,000
Gross adjustments are $15,500, or 5% of the sale price, so this comp is a close match. All rates are illustrative planning defaults.
Track how much you adjusted. If the net adjustment on a comp is more than 15% of its price, or the gross adjustments (all of them added up, ignoring sign) are more than 25%, that comp is not very similar. Keep it if you must, but trust it less.
Step 3: Reconcile to one ARV
Now you have five or six adjusted prices. Give more weight to the comps that needed fewer adjustments, sold more recently and sit closer. Then compare the weighted average to the plain median. Using the lower of the two is a conservative default that keeps one high outlier from pulling your ARV up.
- Adjusted prices
- $318,000, $322,000, $325,500, $329,000, $341,000
- Weights (recency and distance, simplified)
- 1.0, 0.85, 1.0, 0.85, 0.65
- Weighted average: $1,418,500 / 4.35
- $326,092
- Median of adjusted prices
- $325,500
- Middle range (25th to 75th percentile)
- $322,000 to $329,000
The $341,000 comp sold farthest away, so it gets the least weight and does not set the number.
One more check: compare your ARV to the highest renovated sale in the neighborhood. If your number is above that ceiling, you are betting your house will set a new record. That can happen, but it should be a choice you make on purpose.
Check your ARV confidence
An ARV is only as good as the comps behind it. ARV confidence puts a number on that. Run The Deal starts at 100 and takes points off for each weakness: fewer than five comps, a wide spread in adjusted prices, comps with heavy adjustments, a median distance over a mile, a median sale age over 180 days, a subject size outside the comp range, and an ARV above the neighborhood ceiling.
- 80 and up: high. The comps agree and sit close.
- 60 to 79: medium. Usable, but check the outliers.
- 40 to 59: low. Walk the comps yourself before you offer.
- Under 40: the deal fails the confidence gate until you find better comps.
How ARV feeds your offer
Once ARV is set, everything else follows. Your max allowable offer is solved backward from it. Your hard money lender caps the loan at a share of it. Your break-even ARV tells you how far it can fall before you lose money. That gap, the ARV cushion, is the single best risk number for a flip.
So test it. Rerun your deal at ARV minus 5% and minus 10%. If a 10% miss turns a good profit into a loss, the deal depends on your comps being exactly right. Price your offer so a normal miss still leaves you whole. Our guide to the 70% rule shows how the offer math works once ARV is set.
Common mistakes
- Using list prices or online estimates. Only closed sales count. Automated estimates are fine as a sanity check, never as the ARV.
- Comping against unrenovated homes without a condition adjustment. A dated house sells for less than your finished one.
- Picking the best comp instead of reconciling all of them. One record sale is not a market.
- Ignoring concessions. A $320,000 sale with $15,000 of seller credits is really closer to a $305,000 sale.
- Crossing a boundary like a major road, a flood zone line or a school zone without adjusting or penalizing the comp.
- Forgetting time. A sale from 10 months ago in a moving market needs a time adjustment, up or down.
Run your ARV through the full deal
ARV is the start, not the finish. Pair it with a real rehab number from our guide on how to estimate rehab costs, then see the profit, cushion and max offer it produces. Run your numbers in the free flip calculator.
Questions
How many comps do I need to calculate ARV?
Three closed sales is the minimum. Five or six is better, because a single outlier moves the number less and the spread tells you how much the comps agree.
Can I use Zillow or another online estimate as my ARV?
Use it as a sanity check only. Automated estimates do not know the condition of the comps or of your finished house, and condition is often the biggest adjustment.
How far back can comps go?
Start with sales from the last 90 days. Widen to 180 days, then a year, only if you cannot find three good comps, and add a time adjustment for the older sales.
Should ARV be the average of the comps?
Not a plain average. Weight the comps by how similar, recent and close they are, then compare that weighted average to the median. Using the lower of the two is a conservative default.
For education only. Not legal, tax, lending or investment advice. Loan programs and guidelines change and vary by lender; confirm current terms with your lender.