How to calculate ARV
After-repair value is the expected sale or refinance value of a property after the planned repairs or construction are complete. It is not the price you pay, and it is not the cost of the work. Lenders and buyers both use it, but the appraisal is what the loan file uses.
The practical way to estimate it before you write an offer is the comparable-sales method. You want closed sales, not listings. Recent means the last few months in a market that is moving, and a bit longer where sales are thin. Nearby means the same neighborhood or the same school zone, not a comp from across the metro that happens to have the same bedroom count. Similar means finished condition, square footage, lot, and bed-bath count a buyer would treat as interchangeable.
Turn each comp into a price per square foot. Add a dollar adjustment when the comp is better or worse than the subject in a way you can price: a garage the subject will not have, a smaller lot, a pool, a busy road. Subtract when the comp is inferior. Divide the adjusted price by that comp's square feet. Do this for three to five comps. Average those rates, or take the median if one sale is an outlier. Multiply by the subject square feet. That product is your ARV estimate. The low and high rates are the range. If the range is wide, you do not have a tight set of comps, and the appraisal can land anywhere inside it.
Adjustments are judgment. A lender will not adopt your spreadsheet because you typed it. The appraiser builds a grid from closed sales and the underwriter reads that report. Distance, sale date, condition, and concession rules differ by program, so those details stay program-specific. Use your estimate to decide if the deal is worth pursuing. Use the appraisal to decide what the loan can be. If you already have an appraised after-repair value, enter it directly and skip the comps.
Worked example (illustrative)
These comps are the ones the calculator opens with. They are not a quote and not an appraisal. Three finished sales: $330,000 at 1,500 square feet, $345,000 at 1,550, and $352,000 at 1,600. No dollar adjustments.
Comps to ARV, then to a loan
The purchase-and-rehab advance is $240,000. 80% of the comp ARV is $272,100. The loan is the smaller one, $240,000, so the purchase/rehab cap binds. Loan-to-cost is 92.3%. Loan to ARV is 70.6%. To see interest, points, and the draw schedule on this same loan, size the full loan and payments.
LTC vs LTV vs ARV
All three are a loan compared with a version of the property. The denominator is what changes. Fix and flip loans are quoted on after-repair value. New construction loans are quoted on loan-to-cost. DSCR loans and bridge loans are quoted on loan-to-value. Bridge loans publish up to 75% and terms of 6–24 months. They do not publish a rate.
| Ratio | Formula | Where this site uses it |
|---|---|---|
| Loan-to-cost | Loan ÷ total project cost | Ground-up, up to 90%. Less-experienced borrowers often 75–85%. |
| After-repair value | Loan ÷ finished value | Fix and flip, up to 80% of ARV is the typical cap. |
| Loan-to-value | Loan ÷ current or as-completed value | DSCR purchase up to 80%. Cash-out loan-to-value is program-specific. Bridge up to 75%. |
A deal can clear a high loan-to-cost and still sit comfortably under the ARV cap, which is what the worked example does. The reverse is the dangerous one: a cheap purchase with a light appraisal. Cost-based leverage looks fine, and the value cap cuts the loan. Rates that go with these products start at 9% for fix and flip, 9.5% for construction, and 5.99% for a DSCR refinance. Final pricing is program-specific.
Max offer and the 80% rule
The offer rule and the lender cap are different jobs that happen to share a percentage on this site. The buying rule answers "what should I pay?" The lender cap answers "what will the loan be?" The BRRRR method financing guide states the buying rule this site publishes: keep the offer at or under 80% of ARV minus rehab. Closing and holding costs come off that number too when you know them. In the worked example the max offer, before those extra costs, is $212,100.
Investors also talk about a 70% rule: 70% of ARV minus rehab. That is a tighter offer. It is common in flip classrooms. It is not the figure this site publishes, and this calculator does not switch over to it. The percentage in the max-offer panel starts at 80% because that is the published guide and the loan cap. You can type a different percentage to test your own rule.
A max offer is not a promise you will win the house, and it is not the loan amount. The loan still has to pass both the advance and the ARV cap. If your offer is the max offer and the appraisal comes in at your ARV, the loan is at the cap and you bring the rest, including costs the formula already subtracted and any costs it did not.
Construction loan-to-cost
A ground-up loan is sized on cost, not on a purchase-and-rehab split. Total cost is land, or land value if you already own it, plus hard costs, soft costs, and a contingency. Contingency on this site is typically 5–10% of hard costs. The calculator defaults to 10% of hard costs. The loan is your loan-to-cost percentage times that total, and it will not go above 90%.
Experienced builders can reach up to 90%. Less-experienced borrowers typically land at 75–85%. For a first build, plan on around 60–70%. Spec home financing and hard money construction loans describe that 60–70% band when a licensed general contractor with finished work is on the team. Some new-construction programs cite 60–65% for a first project. The slider runs from 60% to 90% so every published band is available. The default is 85%.
About 10% of each draw is held back until the final inspection. You pay interest only on the amount drawn. Terms run 12–24 months, and spec programs commonly offer 3–6 month extensions for a fee. The loan can also be high against the as-completed value even when the loan-to-cost looks ordinary. No page on this site publishes a numeric as-completed cap. Above 75% of the value you enter, the calculator says that cap is program-specific. The minimum published on new construction and spec pages is $150K. The hard money construction page does not publish a separate minimum.
When the ARV cap binds
The ARV cap binds when 80% of after-repair value is smaller than the purchase-and-rehab advance. That happens when you paid too much, the rehab is heavy relative to the finished value, or the comps were optimistic. The calculator reduces rehab funding first and shows the unpaid rehab as cash you bring. Only after the rehab advance is gone does the cap cut the purchase advance and raise the down payment.
What to do is decided before you are under contract, not after the appraisal. Drop the offer. Cut scope that does not raise value. Or walk away. Adding a wishful comp does not move the appraiser. If you are already in the deal, the cash to close is the gap, and a larger down payment is the usual cure. A bridge loan does not erase a value cap. It is a different product, quoted on loan-to-value, for a timing gap.
Leave room between the loan you need and the cap. In the worked example the advance sits under the ARV cap, which is why the purchase-and-rehab count binds and there is still space if the appraisal is a little light. Shrink the ARV in the calculator until the sentence changes. That is the appraisal you cannot afford.
Exit into a DSCR loan
A flip can be sold, and the sale pays the loan off. It can also be rented and refinanced. A DSCR loan qualifies on the rent, not on W-2s or tax returns. DSCR loans start at 5.99%, run 30-year fixed, and publish up to 80% on a purchase. Cash-out loan-to-value is program-specific. This guide does not treat 80% or 75% as a cash-out cap. The BRRRR guide walks through buy, rehab, rent, refinance, and repeat, including seasoning. The refinance itself is a DSCR cash-out refinance. Run the rent in the DSCR calculator.
The short-term loan has to last through the work, the lease-up, and any seasoning the refinance needs. Fix and flip terms are 6–18 months. Construction terms are 12–24 months. If the calendar slips, a bridge is the usual hold. Price that before you close the first loan, not the week the maturity date arrives.
FAQ
What is ARV in real estate?
After-repair value is the expected sale or refinance value of a property after the planned repairs or construction are complete. It is not the price you pay, and it is not the cost of the work. Lenders and buyers both use it, but the appraisal is what the loan file uses.
How do I calculate ARV?
Pick three to five recent, nearby sales of similar finished homes. For each comp, add or subtract a dollar adjustment, divide by that home's square feet, then average those prices per square foot (or take the median). Multiply by the subject home's square feet. The result is an estimate. The appraisal decides the figure a lender will use, and appraisal method is program-specific.
What's the difference between LTC and LTV?
Loan-to-cost divides the loan by what the project costs: purchase plus rehab, or land plus hard costs, soft costs, and contingency. Loan-to-value divides the loan by a value, usually the current value, the after-repair value, or the as-completed value. The same loan can be a high loan-to-cost and a lower loan-to-value when the finished home is worth more than it cost.
How much will a lender lend on ARV?
Up to 80% of ARV. It is the same figure published on the fix and flip page. The loan is still the lower of that cap and the purchase-and-rehab advance.
What LTC can a first-time builder get?
Around 60–70% of cost is the range to plan for. Spec and hard money construction pages describe about 60–70% for a first-time builder with a licensed general contractor. Some new-construction programs cap a first project at 60–65% on that same basis. Less-experienced borrowers who are past a first build more often land at 75–85%. Experienced builders can reach up to 90%.
What is the 70% rule, and what does the site use?
The common industry 70% rule keeps an offer at or under 70% of ARV minus rehab. This site's published buying guide, on the BRRRR page, is 80% of ARV minus rehab. This calculator uses that published percentage. It is the same 80% figure as the typical lender cap, stored in one setting.
Does the lender use my ARV or the appraisal?
The lender uses the appraisal. Your comp estimate is how you decide whether to write the offer. The appraiser's after-repair value, from closed sales of finished homes, is the ceiling the loan follows. How a program treats your adjustments, the distance of comps, and the sale dates is program-specific.
Can I finance 100% of rehab?
Up to 100% of the approved rehab budget can be advanced, together with up to 90% of the purchase price, and the total is still capped at the ARV percentage. When that cap is the smaller number, rehab funding is reduced first.
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Tell us the comps or the ARV, the rehab or the build, and the offer you want to write.
Builders First Funding is a loan broker, not a direct lender. ARV and loan estimates are for illustration only and are not an appraisal, loan offer, or commitment. Leverage, rates, and terms are program-specific and depend on the appraisal, project, borrower experience and credit, and lender approval.