The After Repair Value (ARV) is the estimated value of a property after all planned renovations and improvements are completed. It is arguably the most critical number in any fix-and-flip analysis. An accurate ARV determines your potential profit margin and informs your Maximum Allowable Offer (MAO). For lenders like Harvey Capital Funding, a well-supported ARV is essential for underwriting a fix-and-flip loan, as it represents the value of the asset securing the loan.
Overestimating the ARV can lead to a negative profit margin, while underestimating it might cause you to miss out on a viable deal. This worksheet provides a structured process for performing a Comparable Market Analysis (CMA) to arrive at a data-driven, defensible ARV.
The 4-Step ARV Analysis Framework
The foundation of any good ARV is finding recently sold properties that are truly similar to your subject property *after* renovation. The best source is the Multiple Listing Service (MLS), which you can access through a real estate agent. Other sources include Zillow, Redfin, and local property records.
Key Rules for Selecting Comps:
- Timeframe: Prioritize sales within the last 90 days. Extend to 180 days only if necessary.
- Proximity: Stay within a 0.5-mile radius in urban/suburban areas. Up to 1 mile if the neighborhood is highly consistent.
- Similarity: Match style, age, square footage (+/- 15%), bed/bath count, and lot size as closely as possible.
- Condition: The comp must be in the condition you expect your property to be in post-rehab (i.e., fully renovated).
No two properties are identical. You must adjust the sale price of your comps to account for differences between them and your subject property. If a comp is superior to your subject property in some feature, you subtract value from its sale price. If it's inferior, you add value.
Common Adjustment Factors:
- Gross Living Area (GLA): Adjust per square foot (e.g., $50-$100/sqft).
- Bedrooms/Bathrooms: Add/subtract value for extra or fewer rooms (e.g., $5k for a half-bath).
- Garage/Basement: Adjust for finished vs. unfinished spaces or lack of a garage.
- Condition/Finishes: Quantify the value of superior vs. standard finishes.
- Lot Size & Location: Adjust for corner lots, cul-de-sacs, or proximity to amenities/detriments.
Not all comps are created equal. The most relevant comps should have a greater influence on your final ARV. Assign a weight to each comp based on its overall similarity and the magnitude of adjustments required.
A common practice is to give the most similar comp (requiring the fewest adjustments) the highest weight (e.g., 40%), the next best 30%, and so on. The total weight for all comps must equal 100%.
The final step is to calculate the weighted average of your adjusted comp prices. For each comp, multiply its adjusted sale price by its assigned weight. Then, sum the results from all your comps.
Formula: (Comp 1 Adjusted Price * Weight) + (Comp 2 Adjusted Price * Weight) + ... = Final ARV
This final number is your defensible After Repair Value. You can now use this ARV in our investor calculators to determine your offer price and potential profit.
Here is a simplified example of how to lay out your comparable properties for analysis. A real worksheet would include columns for adjustments and weighted value.
| Comp Address | Sold Price | Sq. Ft. | Beds/Baths | Condition | Distance (mi) | Sold Date |
|---|---|---|---|---|---|---|
| 123 Main St | $350,000 | 1800 | 3 / 2 | Renovated | 0.2 | 1 month ago |
| 456 Oak Ave | $335,000 | 1750 | 3 / 2 | Good | 0.4 | 2 months ago |
| 789 Pine Ln | $365,000 | 1850 | 4 / 2.5 | Renovated | 0.3 | 3 weeks ago |
| 101 Maple Dr | $320,000 | 1900 | 3 / 2 | Needs Update | 0.5 | 3 months ago |
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Have a property under contract or a potential deal you're analyzing? A well-supported ARV is the first step. Let's discuss your project and how our flexible financing can help you succeed.