After Repair Value (ARV) Calculator
Estimated After Repair Value (ARV):
Enter details and click 'Calculate ARV' to see the result.
Error:
Please enter at least one valid comparable sale with both price and square footage.'; return; } if (isNaN(subjectSqFt) || subjectSqFt <= 0) { document.getElementById('arvResult').innerHTML = 'Error:
Please enter a valid Subject Property Square Footage greater than zero.'; return; } // Default featureAdjustments to 0 if not a valid number if (isNaN(featureAdjustments)) { featureAdjustments = 0; } var averagePPSF = totalPPSF / validCompsCount; var estimatedValueFromSqFt = averagePPSF * subjectSqFt; var finalARV = estimatedValueFromSqFt + featureAdjustments; document.getElementById('arvResult').innerHTML = 'Estimated After Repair Value (ARV):
$' + finalARV.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ''; }Understanding After Repair Value (ARV) in Real Estate
The After Repair Value (ARV) is a critical metric for real estate investors, particularly those involved in "fix and flip" or "BRRRR" (Buy, Rehab, Rent, Refinance, Repeat) strategies. It represents the estimated market value of a property once all necessary repairs, renovations, and upgrades have been completed.
Why is ARV So Important?
For investors, ARV isn't just a number; it's the foundation of their investment strategy. It helps answer crucial questions:
- Maximum Allowable Offer (MAO): ARV directly influences how much an investor can afford to pay for a distressed property while still making a profit after renovation costs. A common rule of thumb is the "70% Rule," which suggests an investor should pay no more than 70% of the ARV minus the repair costs.
- Profit Potential: By accurately estimating ARV, investors can project their potential profit margins, ensuring the project is financially viable.
- Financing: Lenders for rehab loans often base their loan amounts on the ARV, not just the current purchase price.
- Exit Strategy: Whether selling the property or refinancing it to pull out equity, the ARV determines the potential proceeds.
How is ARV Calculated?
Calculating ARV primarily relies on a process similar to what professional appraisers use: analyzing comparable sales (comps). The core idea is to determine what similar, fully renovated properties in the immediate area have recently sold for.
The general formula used in this calculator is:
ARV = (Average Price Per Square Foot of Comps × Subject Property Square Footage) + Feature Adjustments
Key Components:
- Comparable Sales (Comps): These are recently sold properties (ideally within the last 3-6 months) that are similar in size, age, style, and features to your subject property, and are already in "after repair" condition. You want to find properties that have already been renovated to the standard you intend to achieve.
- Price Per Square Foot (PPSF): For each comparable sale, you calculate its sale price divided by its square footage. This gives you a standardized value.
- Average PPSF: By averaging the PPSF of several strong comps, you get a baseline value for your area.
- Subject Property Square Footage: This is the total heated and cooled living area of the property you are evaluating.
- Feature Adjustments: No two properties are identical. Adjustments are made for unique features or differences between your subject property and the comps that aren't captured by square footage alone.
- Positive Adjustments: Add value for features your property will have that comps lack (e.g., an extra garage, a premium view, a larger lot, a swimming pool).
- Negative Adjustments: Subtract value if your property will lack features that comps have (e.g., smaller lot, no basement when comps have one).
Tips for Finding Good Comps:
- Proximity: Look for comps within a 1-mile radius, or even closer in dense urban areas.
- Recency: Prioritize sales from the last 3-6 months. The market can change quickly.
- Condition: Ensure comps are in a similar "after repair" condition to what you plan for your property.
- Property Type: Compare single-family homes to single-family homes, condos to condos, etc.
- Size & Features: Look for similar square footage, number of bedrooms/bathrooms, lot size, and amenities (garage, pool, finished basement).
Example Calculation:
Let's use the default values in the calculator:
- Comp 1: $350,000 / 1800 Sq Ft = $194.44/Sq Ft
- Comp 2: $365,000 / 1900 Sq Ft = $192.11/Sq Ft
- Comp 3: $340,000 / 1750 Sq Ft = $194.29/Sq Ft
Average PPSF = ($194.44 + $192.11 + $194.29) / 3 = $193.61/Sq Ft
Subject Property Sq Ft = 1850 Sq Ft
Estimated Value from Sq Ft = $193.61 * 1850 = $358,178.50
Feature Adjustments = $5,000
Calculated ARV = $358,178.50 + $5,000 = $363,178.50
Important Disclaimer:
This calculator provides an estimate based on the data you input. It is a tool for preliminary analysis and should not replace a professional appraisal or a thorough comparative market analysis (CMA) conducted by an experienced real estate agent or appraiser. Market conditions, specific property nuances, and local regulations can significantly impact actual property values.