ARV Calculator – After Repair Value

Created by AbdulRafay Moeen and Wei Bin Loo
Reviewed by Hanna Pamuła, PhD candidate and Steven Wooding
Last updated: Jul 06, 2022

Let us help you understand what ARV means, along with its purpose and how to calculate the ARV of a property using our free ARV calculator.

ARV stands for after repair value. It helps you determine the maximum amount you should bid on a property based on its current and expected value after renovations.

In our after repair value calculator, you can either use the property's actual value or the average price per square foot or per square meter to figure out your potential return on investment.

What is the meaning of ARV?

ARV is an abbreviation of after repair value. Investors mainly use this term in real estate.

ARV, along with the 70% rule in real estate, is what helps you calculate and determine the maximum amount to bid on a property, based on the property's sale price, renovation cost, and the forecasted increase in value after renovations.

What is the 70% rule for house flipping? Let's learn about this next.

Investors purchase rule of 70% for real estate

There are several rules of thumb for evaluating a property when investing. One of these rules is known as the 70% rule.

This rule suggests that you should pay only up to 70% of a property's calculated ARV or after repair value to maximize your retuns on the invested capital. If the value is lower, there is more profit but little chance of securing the deal. And if the value is higher, there is less room to profit from the investment.

So the maximum price you should offer on a regular property is 70% of its potential ARV and holding period while subtracting your renovation costs. With the remaining margin, you have to cover the settlement charges, commissions, holding, closing, and lender fees, to finally, make some profit.

Suppose you're running a renovation business with a well-maintained average collection period, and you can reduce your expenses from that end. Then you may offer up to 75% of a property's potential value to close more deals, especially in cases where you know the property will have a significant increase of worth and give you a good return on sales after those renovations.

How to use the after repair value calculator?

With our free ARV calculator, you have two methods to determine how the after-repair value helps your business, along with what should be the maximum bidding amount and the potential ROI based on your budget.

The first method calculates ARV based on the current value of the property:

  1. Enter the property's current value in the first field, e.g., 100,000 USD.
  2. Then enter how much worth the value of renovations will have, e.g., 50,000 USD.
  3. You will then receive your ARV or after repair value of the property.
    In our case, it will be 150,000 USD.

The second method calculates ARV based on the average price in the area:

  1. Enter the average area price per square foot of the locality in the first field, e.g., 150 USD.
  2. Then enter the total area of your property, e.g., 1,000 ft2.
  3. You will then receive your ARV or after repair value of the property.
    Which, in this case, will also be 150,000 USD.

Next, we'll find out the best price to purchase that property.

  1. Enter an estimated total cost of renovation that you will incur on that property, e.g., 25,000 USD.
  2. Based on your forecast of the property's increase in value after its renovation, enter your cost to profit ratio percentage in investors purchase rule. 70% is good in most cases, where 70% is your cost, and 30% is your potential profit.
  3. Lastly, you will obtain the suggested maximum bid price along with your potential ROI on the respective property.

In our examples, the ARV or after repair value calculator tells us:

  • If a property's initial value is 100,000 USD;

  • Or if the price in the area is 150 USD per sq. ft, and the total land of the property is 1,000 ft2;

  • We may offer a maximum bid of 80,000 USD;

  • So after spending 25,000 USD on top, in renovations;

  • We can earn up to 45,000 USD in profit. That's 30% ROI.

🔎 Using advanced mode, you can enter the repair cost per square foot or square meter and the total area that requires repairs, to calculate the total cost of renovation for the property, e.g.,

  • Enter an estimated repair cost per sq. ft. that will incur on the property: 50 USD.
  • Enter the total area that requires repairs on the property: 500 ft2.
    (If the entire property requires repairs, enter the same value as the total area of your property).

And you will get the required total cost of renovation for the property: 25,000 USD.

We hope you now understand how to calculate ARV using our free ARV calculator. Next, we'll manually calculate the same using the ARV real estate formula.

How to calculate the ARV of a property using the ARV real estate formula?

Here's how to calculate the ARV of a property manually and make quick calculations of your potential ROI.

Formula to calculate ARV | after repair value:

  • ARV = PV + VR

where:

  • ARV – After repair value;
  • PV – Property value before renovation or repairs; and
  • VR – Value of the required renovations.

For example, if the value of our property before the renovation is 100,000 USD and the value that renovation will add is around 50,000 USD, we can calculate it as follows:

  • ARV = 100,000 USD + 50,000 USD

  • = 150,000 USD

This result tells us that the ARV for our property will be 150,000 USD.

To understand how to determine after repair value of a property using the average price per square foot or square meter, use the following formula:

  • ARV = APS × AREA

where:

  • ARV – After repair value;
  • APS – Average price per sq. ft. or sq. m; and
  • AREA – Total area of the property.

For example, if the average price per square foot of our property is 150 USD with a total area of 1000 square feet, we can calculate it as follows:

  • ARV = 150 USD × 1000 sq. ft.

  • = 150,000 USD

Now use the following formula to calculate the suggested bid price at 70% property value after renovations:

  • SP = ARV × 0.7 - RC

where:

  • SP – Suggested price;
  • ARV – After repair value; and
  • RC – Renovation costs.

We first calculate how much is 70% of the renovated property and then subtract the renovation cost from that value. For example, if our potential renovation cost is 25,000 USD, we calculate it as follows:

SP = 150,000 USD × 0.7 - 25,000 USD

= 105,000 USD - 25,000 USD

= 80,000 USD

From this, we have found our suggested bid price for this property to be 80,000 USD.

💡 If the area that requires repairs is less than the total area of the property, we can calculate the total cost of repairs by multiplying the repair cost per square foot or square meter with the total livable area that requires repairs:

  • TRC = ARC × AREA

where:

  • TRC – Total repair cost;
  • ARC – Average repair cost per sq. ft. or sq. m; and
  • AREA – Area of the property that requires repairs.

To illustrate, if the average repair cost per square foot of our property is 50 USD with a total area of 500 square feet that requires repairs, we calculate it as follows:

  • TRC = 50 USD × 500 sq. ft.

  • = 25,000 USD

Knowing the ARV of a property gives you the potential to make the most out of your investment and maximize your returns. We hope you now have a sound understanding of what ARV means and can invest in real estate with more confidence and ease.

AbdulRafay Moeen and Wei Bin Loo
Calculate the worth of property
Method:
Value of the property
Property's current value
$
Value of renovations
$
After repair value
$
Best purchase price for the property
Total cost of renovation
$
Investors purchase rule
%
Maximum bid price
$
Potential return on investment
ROI
$
Percentage
%
Check out 22 similar real estate calculators 🏠
Average daily rateCap rateCommercial lease… 19 more
People also viewed…

CPC and CPM

Our CPC and CPM calculator helps you figure out the real costs of your internet advertising.

Eggs

Quantum physicist's take on boiling a perfect egg.

Fixed asset turnover

Our fixed asset turnover ratio calculator helps you to assess how effectively a company utilizes its fixed assets.

Pizza size

This calculator will help you make the most delicious choice when ordering pizza.
Copyright by Omni Calculator sp. z o.o.
Privacy policy & cookies
main background