After Repair Value (ARV)

After Repair Value (ARV)

What is ARV?

Distressed properties that have significant deferred maintenance may need renovations and repairs. ARV, which stands for After Repair Value, is simply the projected estimate of the property after fixing everything up.

This metric is extremely useful for wholesalers and flippers because if your property purchase price plus the renovation cost is lower than the projected ARV, you will likely lose money on the deal.

What to watch out for

It's extremely important to make sure your ARV is created based on realistic projections. Property investors typically develop a realistic model based on a given market. Identifying similar homes based on square foot, bathrooms, bedrooms, built year, renovation year, and more, you can get close to a reasonable prediction.

Additionally, though your ARV may be able to support the materials cost and the labor cost, it's better to also leave some buffer room. Delays happen and processes stall so it's always good to have enough breathing room to make sure your Return on Investment is worth it.

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