After-repair value (ARV) is the price a property should sell for once the planned renovation is finished. It is an estimate, not an appraisal, built from recent sales of similar nearby homes, called comps, that are already in fixed-up condition. Flippers use it to set a purchase price, and BRRRR investors use it to estimate the refinance loan.
ARV = average price per square foot of renovated comps × square feet of your property
Example: three renovated homes near your property sold in the last few months for $190, $200 and $210 per square foot. The average is $200. Your property is 1,500 square feet, so the estimate is $200 × 1,500 = $300,000. Then adjust for real differences such as a garage, an extra bathroom or a busy street.
The most common mistake is picking comps that flatter the deal: nicer finishes, a better location or list prices instead of sold prices. Keep comps close to your property's size too, because price per square foot often runs higher on smaller homes. Your profit, your refinance loan and your maximum allowable offer all depend on this one number. Check the lowest comp: $190 × 1,500 = $285,000. The ARV calculator shows low, average and high estimates, so make sure the deal still works at the low one.