Fix and Flip Loans · 3 min read
How to Calculate ARV and Use the 70% Rule
How to calculate after-repair value (ARV) for a flip, use the 70% rule to set your maximum offer, and how lenders size loans against ARV.
This guide is part of our Fix and Flip & Hard Money Loans hub.
After-repair value (ARV) is the number that makes or breaks a flip. Lenders use it to size your loan, and experienced investors use it to decide what to offer. Here is how to calculate it and how the 70% rule fits in.
What ARV means
ARV is the estimated market value of a property after your planned renovation is complete. It is based on recent sales of comparable renovated homes, not on the current as-is value.
How to estimate ARV
- Pull sales from the last three to six months, close to the subject property.
- Match on size, bed and bath count, lot, age and condition after renovation.
- Adjust for differences, such as an extra bathroom or a garage.
- Weight the closest matches most heavily and arrive at a value range.
Use sold prices, not list prices. An appraiser or agent opinion of value can confirm your estimate before you commit.
The 70% rule
The 70% rule is a quick screen for flips: your maximum purchase price should be about 70% of ARV minus repair costs.
Maximum offer = (ARV × 0.70) − repair costs
Example: a home with an ARV of $400,000 needing $60,000 of work. 70% of $400,000 is $280,000. Subtract $60,000 and your maximum offer is about $220,000. The remaining 30% covers closing costs, holding costs, financing, selling costs and profit.
How lenders use ARV
Hard money lenders usually cap the loan at a percentage of ARV, commonly around 70% to 75%, as well as a percentage of total cost. If your purchase price fits the 70% rule, the deal usually fits lender limits too. See how to qualify for a fix and flip loan for the other factors lenders weigh.
When to adjust the rule
- In high-priced markets, 75% or more can still work because fixed costs are a smaller share of the price.
- In slow markets or on heavy rehabs, use 65% to leave more room for surprises.
- If you plan to hold as a rental, run rental numbers and DSCR instead. See how to calculate DSCR.
Common ARV mistakes
- Using comps from a different school district or across a major road.
- Assuming your renovation will match the best house on the street.
- Ignoring how long comps sat on the market.
- Underestimating repairs, which lowers your real margin.
Related guides
- How to Qualify for a Fix and Flip Loan: What Lenders Look For
- Hard Money vs. Bank Loans for Real Estate Investors
- How Rehab Draws Work on a Fix and Flip Loan
Explore the full hub: Fix and Flip & Hard Money Loans. Other financing: DSCR & Long-Term Rental Loans · Commercial Real Estate Loans · Unsecured Business Loans · Trust Deed Investing.
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Terms, leverage and timelines vary by lender, property and borrower qualifications. This article is general information, not financial, legal or investment advice, and not a commitment to lend.