ARV Calculator – After Repair Value

Tools to help you Make informed Decisions

ARV stands for after repair value. It helps you determine the maximum amount you should bid on a property based on its current and expected value after renovations.
In our after repair value calculator, you can either use the property's actual value or the average price per square foot or per square meter to figure out your potential return on investment
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What is the meaning of ARV?

ARV is an abbreviation of after repair value. Investors mainly use this term in real estate.

ARV, along with the 70% rule in real estate, is what helps you calculate and determine the maximum amount to bid on a property, based on the property’s sale price, renovation cost, and the forecasted increase in value after renovations.

What is the 70% rule for house flipping? Let’s learn about this next.

Investors purchase rule of 70% for real estate

There are several rules of thumb for evaluating a property when investing. One of these rules is known as the 70% rule.

This rule suggests that you should pay only up to 70% of a property’s calculated ARV or after repair value to maximize your returns on the invested capital. If the value is lower, there is more profit but little chance of securing the deal. And if the value is higher, there is less room to profit from the investment. Check out our ROIC calculator to understand more on this topic.

The maximum price you should offer on a regular property is 70% of its potential ARV and holding period while subtracting your renovation costs. With the remaining margin, you have to cover the settlement charges, commissions, holding, closing, and lender fees, to finally, make some profit.

Suppose you’re running a renovation business with a well-maintained average collection period, and you can reduce your expenses from that end. Then you may offer up to 75% of a property’s potential value to close more deals, especially in cases where you know the property will have a significant increase of worth and give you a good return on sales after those renovations.

How to use the after repair value calculator?

With our free ARV calculator, you have two methods to determine how the after-repair value helps your business, along with what should be the maximum bidding amount and the potential ROI based on your budget. Please check out our budget calculator and ROI calculator to understand more on these topics.

The first method calculates ARV based on the current value of the property:

  1. Enter the property’s current value in the first field, e.g., 100,000 USD.
  2. Then enter how much worth the value of renovations will have, e.g., 50,000 USD.
  3. You will then receive your ARV or after repair value of the property.
    In our case, it will be 150,000 USD.

The second method calculates ARV based on the average price in the area:

  1. Enter the average area price per square foot of the locality in the first field, e.g., 150 USD.
  2. Then enter the total area of your propertye.g., 1,000 ft2.
  3. You will then receive your ARV or after repair value of the property.
    Which, in this case, will also be 150,000 USD.

Next, we’ll find out the best price to purchase that property.

  1. Enter an estimated total cost of renovation that you will incur on that property, e.g., 25,000 USD.
  2. Based on your forecast of the property’s increase in value after its renovation, enter your cost to profit ratio percentage in investors purchase rule. 70% is good in most cases, where 70% is your cost, and 30% is your potential profit.
  3. Lastly, you will obtain the suggested maximum bid price along with your potential ROI on the respective property.

In our examples, the ARV or after repair value calculator tells us:

  • If a property’s initial value is 100,000 USD;

  • Or if the price in the area is 150 USD per sq. ft, and the total land of the property is 1,000 ft2;

  • We may offer a maximum bid of 80,000 USD;

  • So after spending 25,000 USD on top, in renovations;

  • We can earn up to 45,000 USD in profit. That’s 30% ROI.

Using advanced mode, you can enter the repair cost per square foot or square meter and the total area that requires repairs, to calculate the total cost of renovation for the property, e.g.,

  • Enter an estimated repair cost per sq. ft. that will incur on the property: 50 USD.
  • Enter the total area that requires repairs on the property: 500 ft2.
    (If the entire property requires repairs, enter the same value as the total area of your property).

And you will get the required total cost of renovation for the property: 25,000 USD.

Knowing the ARV of a property gives you the potential to make the most out of your investment and maximize your returns. We hope you now have a sound understanding of what ARV means and can invest in real estate with more confidence and ease.

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