What is After Repair Value (ARV) and How is it Calculated?

After Repair Value (ARV) is a crucial concept in real estate, especially for investors involved in property flipping or renovation projects. ARV represents the estimated value of a property after it has undergone necessary repairs or renovations.

Key Components of ARV Calculation:

1. Current Property Value:

   • Begin with the current value of the property before any repairs or renovations.

2. Cost of Repairs:

   • Evaluate the anticipated cost of repairs or renovations needed to enhance the property's value.

3. Market Comparisons:

   • Conduct a comparative market analysis (CMA) to assess the values of similar, recently renovated properties in the area.

4. Future Value Projection:

   • Estimate the potential value of the property after repairs, considering market trends and the perceived impact of improvements.

5. ARV Formula:

   • ARV = Current Property Value + Cost of Repairs

Investors use ARV to determine the profitability of a renovation project and make informed decisions about property acquisition, renovation budgeting, and potential resale value.