Key takeaways
- ARV comes from closed sales, not listings or Zestimates.
- Use three to five recent, nearby, similar, renovated comps.
- Adjust each comp for meaningful differences, then work in price per square foot.
- Treat ARV as a range. Lenders and appraisers lean toward the well-supported middle, not the best sale.
Why ARV matters for financing
On a renovation loan, ARV sets one of the two limits on how much you can borrow. If a lender caps the loan at a percentage of ARV and your ARV is overstated, the loan comes in lower than you planned and you need more cash at closing. ARV also drives your profit, your maximum offer and your exit.
How to calculate ARV in five steps
1. Define the finished product
Write down what the property will be after renovation: bedrooms, bathrooms, finished square footage, parking, and the finish level. You are valuing that finished house, not the one you are buying.
2. Pull comparable sales
Find sold properties that match the finished product. Good comps are:
- Recent: sold within roughly the last six months where possible, older only if the market is thin.
- Close: same neighborhood, and in cities the same side of major dividing lines like highways or rail.
- Similar: same property type and style, similar size, bed and bath count and lot.
- Renovated: finished to roughly the standard you plan.
3. Adjust for differences
No comp is identical. Adjust each comp's sale price up or down for features that differ from your finished property. If a comp has a garage and yours will not, subtract the garage's value from the comp. If yours will have an extra bathroom, add to the comp. Keep adjustments modest and grounded in what the local market pays for each feature.
4. Convert to price per square foot
Divide each adjusted sale price by the comp's living area. This puts different-sized houses on a common scale.
5. Apply to your property and read the range
Multiply the average (or median) adjusted price per square foot by your finished square footage. Also calculate the result using the lowest and highest comps. That range is the honest answer.
Worked example
Hypothetical comps| Comp A: $612,000 ÷ 1,580 sf | $387/sf |
| Comp B: $655,000 − $10,000 adj. ÷ 1,720 sf | $375/sf |
| Comp C: $598,000 + $8,000 adj. ÷ 1,610 sf | $376/sf |
| Comp D: $640,000 ÷ 1,700 sf | $376/sf |
| Average adjusted price per sq ft | $379/sf |
| ARV for a 1,650 sf finished house | ≈ $625,000 |
Rounded. Try your own comps in the ARV calculator.
ARV mistakes that shrink your loan
- Using the best sale in the area as the benchmark instead of the typical one.
- Using active listings. Asking prices are not values.
- Comparing across property types, such as a single-family comp for a two-family.
- Assuming square footage you cannot legally add. Unpermitted space may not count.
- Ignoring market direction. In a softening market, six-month-old comps can overstate value.
ARV and the 70% rule
Many investors screen deals with the 70% rule: maximum purchase price equals 70% of ARV minus the renovation budget. It is a quick filter that leaves room for financing, holding and selling costs plus profit. It is not a lending standard, and in higher-priced markets investors often run full numbers instead. The hard money loan calculator does that.
ARV questions
How do I calculate ARV?
Find three to five recent sales of renovated, comparable properties nearby, adjust each for differences, convert to price per square foot, and apply the result to your finished square footage. Read the result as a range.
Does the lender use my ARV?
The lender relies on its own valuation, such as an appraisal or a desktop valuation. A clear set of comps helps that valuation go smoothly.
How many comps do I need?
Three is a minimum; four or five gives a more reliable range. Quality matters more than quantity.
