How to Calculate After-Repair Value (ARV) from Comps
ARV is what a property will be worth once it's fixed up — estimated from comparable sales, not guesswork. Here's the price-per-square-foot method, a worked example, and where it goes wrong.
After-repair value (ARV) is the estimated market value of a property after a renovation is complete. It's the foundation of every flip: the 70% rule, your maximum offer, and your projected profit all trace back to it. Get the ARV wrong and every downstream number is wrong with it.
ARV is not an opinion or a hoped-for number. It's estimated the same way an appraiser estimates value — from comparable sales (“comps”): recently sold properties similar to yours, in the condition yours will be in when finished.
The price-per-square-foot method
The most common approach normalizes each comp to a price per square foot, then applies the average to your property:
1. Price per sq ft (each comp) = sale price ÷ square footage
2. Average $/sq ft = mean of the comps
3. ARV = average $/sq ft × your square footage
A worked example
Your subject property is 1,500 sq ft. Three renovated homes nearby recently sold:
Comp A $315,000 ÷ 1,450 = $217/sq ft
Comp B $298,000 ÷ 1,400 = $213/sq ft
Comp C $342,000 ÷ 1,600 = $214/sq ft
Average = $214.50/sq ft
ARV = $214.50 × 1,500 ≈ $322,000
What makes a comp valid
A good ARV depends entirely on good comps. The tighter these are, the more you can trust the number:
- Recent — ideally sold within the last 3–6 months. Older sales miss market moves.
- Close — same neighborhood, and preferably the same side of any dividing line (a school boundary, a highway, a subdivision) that changes value.
- Similar — comparable square footage, bed/bath count, age, lot size, and style.
- Sold, not listed — use closed sale prices. Asking prices are aspirations; sale prices are facts.
- Renovated to your finish level — comps should reflect the condition yours will be in, not tired originals.
Where ARV goes wrong
- Price per square foot is a blunt instrument. It says nothing about location quality, condition, or layout within the group. Use it as a first pass, then sanity-check against the most similar individual comp.
- Small or scattered comp sets mislead. Three tight comps beat ten loose ones. If your comps swing from $190 to $260 per square foot, you don't have an ARV yet — you have a research problem.
- Over-improving past the comps. If nothing in the area sells above $325,000, a $360,000 finish doesn't create a $360,000 ARV — it creates a loss. The comps cap what the market will pay.
Once you have a defensible ARV, it flows straight into your maximum offer via the 70% rule and into your bottom line through a full flip profit analysis.
Sources
Informational only, not professional advice. Real estate outcomes depend on your market, financing, and tax situation — verify every figure against your own numbers and a qualified professional before acting on a deal.