ARV — After Repair Value — is the single most important number in fix and flip financing. It determines how much a hard money lender will lend you, whether your deal makes financial sense, and whether you'll have enough profit margin to cover costs, pay off the loan, and walk away with a return.
Most experienced flippers have run hundreds of ARV calculations. But first-time and intermediate investors often miscalculate it — and it's one of the most expensive mistakes in the business. This article explains exactly how to calculate ARV correctly and how hard money lenders use it to size your loan.
ARV (After Repair Value) is the estimated market value of a property after all planned renovations are complete. It is not the purchase price. It is not the current "as-is" value. It is the projected market value of the finished product, compared to similar properties that have recently sold in the same market.
Hard money lenders care about ARV because they're underwriting the loan based on where the property is going, not where it is today. Their exit strategy — and yours — depends on the renovated property being worth enough to cover the loan payoff and generate a profit.
ARV = Price Per Square Foot of Comparable Sales × Subject Property Square Footage (adjusted for condition, features, and location)
More practically, ARV is derived from a comparative market analysis (CMA) — essentially the same process a real estate agent uses to price a listing, applied to the subject property's post-renovation condition.
The quality of your ARV estimate is only as good as your comparables. Here's how to pull them correctly:
Start within a 0.5-mile radius of the subject property. In dense urban markets, tighten this to 0.25 miles. In rural or suburban markets, you may need to extend to 1–2 miles. The goal is to stay within the same neighborhood or subdivision where possible.
Use sales from the past 3–6 months. Markets move; a sale from 18 months ago may not reflect current conditions. In fast-moving markets, 90 days is a better filter.
Compare single-family to single-family, not single-family to townhomes. Match the property class (A, B, C neighborhood) to the subject property's neighborhood.
Comparable properties should be within 20% of the subject's finished square footage. A 1,200 sq ft subject property should compare to homes in the 960–1,440 sq ft range. Bedroom and bathroom counts matter — a 3/2 is not comparable to a 4/3 in the same neighborhood.
Your comps need to reflect the condition your renovated property will be in. If you're doing a full gut renovation with new kitchen, baths, flooring, and systems, compare to properties that were recently sold in updated/renovated condition — not distressed sales.
Raw comp data gives you a range, not a precise number. You adjust from that range based on differences between the comp and your subject:
Working with a local real estate agent or appraiser to validate your ARV is one of the most valuable due-diligence steps a flipper can take, especially in a new market.
Hard money lenders use multiple metrics to size fix and flip loans:
LTV (Loan-to-Value): The loan as a percentage of the current as-is property value. A lender offering 70% LTV on a property worth $200,000 as-is will lend $140,000.
LTC (Loan-to-Cost): The loan as a percentage of total project cost (purchase price + renovation budget). This determines how much of your out-of-pocket costs the lender will cover.
LTARV (Loan-to-After-Repair-Value): The loan as a percentage of the ARV. This is the ceiling — most hard money lenders cap fix and flip loans at 65–75% of ARV, regardless of what LTV or LTC would otherwise support.
At Lendoor, we lend up to 92.5% LTC on fix and flip projects — meaning we'll cover a very high percentage of your project costs. But the LTARV ceiling still applies. If the ARV doesn't support the loan amount, the loan amount comes down.
Example:
Purchase price: $150,000
Renovation budget: $75,000
Total project cost: $225,000
Lendoor at 92.5% LTC: $208,125
ARV: $320,000
65% LTARV: $208,000
In this example, the LTARV cap is the binding constraint by a small margin. The ARV calculation directly determined the loan amount.
Inflated ARV is one of the most common — and costly — mistakes in fix and flip financing. Here's what goes wrong:
Your loan gets cut. Hard money lenders order their own appraisals. If the appraiser's ARV comes in lower than your estimate, the lender will size the loan to the lower number. You'll have to bring more cash to close.
Your profit margin evaporates. If you budgeted a $60,000 profit based on a $300,000 ARV, and the actual sale comes in at $265,000, your profit collapses — and may not cover your holding costs.
You can't exit. In a worst case, the property doesn't appraise at a level that supports your loan payoff. You may have to sell at a loss or negotiate a loan extension.
Successful flippers are conservative with ARV estimates. Underestimating ARV means you might pass on deals that could have worked — but overestimating ARV has blown up more flipping businesses than any other single factor.
Q: What is a good ARV margin for a fix and flip?
A: Most experienced flippers target a gross profit margin of 15–20% of ARV (sale price minus total costs). A deal where total costs (purchase + rehab + financing + commissions + holding) equal 75–80% of ARV leaves room for a reasonable profit.
Q: Can I dispute a lender's appraisal if the ARV comes in low?
A: Yes. If you have strong comparable evidence that the appraiser missed, you can submit a reconsideration of value request with documentation. This process isn't always successful, but it's worth pursuing if the appraiser clearly used inferior comps.
Q: How does ARV affect my hard money loan amount?
A: Most hard money lenders cap fix and flip loans at 65–75% of ARV. This is the ceiling regardless of what LTC would otherwise allow. Your ARV directly determines your maximum loan amount.
Q: Should I hire an appraiser before making an offer?
A: For beginners, a pre-offer consultation with a local appraiser or experienced agent is worth the cost. As you gain experience in a specific market, your own CMA skills develop and you'll be able to run numbers accurately without outside help.
Q: Does Lendoor order its own appraisal?
A: Yes. Lendoor orders an independent appraisal on every fix and flip deal. Your ARV estimate is a starting point; the appraisal determines the final underwriting value.
Lendoor offers up to 92.5% LTC on fix and flip projects nationwide. Submit your deal with your ARV and renovation scope, and we'll get you terms within 24 hours.
Visit lendoor.com to get started.
Have a deal ready for terms? Submit it below! Would you rather get in touch with us? Feel free to contact us below.
Lendoor LLC is an Arizona-registered direct lender and registered trademark holder. Lendoor LLC is not affiliated with Lendoor Inc. (a defunct New York corporation), any cryptocurrency platform, or any crowdlending service.
Dana Lefkowitz NMLS# 1997062. Loans originated through Lendoor LLC in partnership with licensed mortgage brokers. NMLS Consumer Access: nmlsconsumeraccess.org.
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