After repair value is the estimated resale value of a property after a specified renovation, supported by comparable sales.
Frequently asked questions
What is ARV (After Repair Value)?
ARV — After Repair Value — is the estimated market value of a property after all planned repairs and renovations are complete. It's the key underwriting input for fix-and-flip deals: every financial metric (profit, ROI, max offer, margin) depends on getting ARV right. ARV is determined by analyzing comparable sales (comps) — recently sold properties within a quarter-mile radius of similar size, condition, age, and amenity level. The most reliable ARVs come from a licensed real estate agent running a formal CMA (comparative market analysis).
What is the 70% rule in house flipping?
The 70% rule is the most widely used quick-screen heuristic in residential real estate investing: never pay more than 70% of the ARV minus your estimated rehab costs. Formula: Maximum Allowable Offer (MAO) = (ARV × 0.70) − Rehab. The 30% gap covers your holding costs (taxes, utilities, insurance), financing costs, closing costs, realtor fees, and profit margin. It's intentionally conservative — it protects you when comps are soft, rehab runs over, or the market shifts while you're holding.
How accurate is ARV estimation?
ARV accuracy depends entirely on comp quality. In liquid suburban markets with recent sales, a good agent's CMA is typically within 3–5% of final appraisal. In rural areas, custom homes, or slow markets with few comparable sales, ARV estimates can swing 8–15%. The most common mistakes: using comps that are too far away, too old (more than 6 months), or in a different school district or subdivision. Before committing capital, get at least two independent ARV estimates — one from an agent, one from a licensed appraiser if the deal is large enough.
Can I use a higher percentage than 70%?
Yes, and many experienced investors do in competitive markets — but only when they have high-confidence variables. Some investors use 75–80% when: they have a rock-solid contractor bid (not a verbal estimate), an agent-confirmed CMA with multiple tight comps, a proven track record in that specific market, and enough cash cushion to absorb overruns. Never flex the rule because the deal 'feels right.' Flex it only when each variable in the formula is verifiably tighter than normal. The 70% rule exists precisely because most deal assumptions turn out worse than expected.
How do I calculate my max offer without the 70% rule?
The target-profit method is often more precise: MAO = ARV − Rehab − Holding Costs − Financing − Closing − Realtor Fees − Target Profit. This approach forces you to estimate every cost line explicitly, which surfaces assumptions the 70% rule hides. The disadvantage is that it requires accurate cost estimates across six categories — the 70% rule's advantage is speed and simplicity for initial deal screening. Use the 70% rule as a first pass, then run the full cost model on deals that pass before signing a contract.