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After-Repair Value in Real Estate

Everything You Need to Know About ARV

Have you ever heard of ARV? Whether you are thinking of flipping a house, interested in real estate investing or thinking of remodeling your home, you may have run into the term. After-Repair Value or ARV is a measure used by real estate investors to estimate the future value of a property after renovations. It’s used to gauge the worth of a property when considering repairs, cost and resale value. 

ARV Definition

ARV is the estimated value of a property after completed renovations and a method used to assess the potential value. Real estate investors use the ARV to determine the worth of a home that needs renovations, considering the market value and price to complete the home repairs and upgrades. Calculating the ARV of a home can give you a good idea of how much value your renovations will add to the real estate. 

How to Calculate ARV

ARV is a relatively simple formula based on the current value of the property and the value after the renovations. 

ARV = Property’s Current Value + Value of Renovations 

The equation helps to determine if the property is a suitable investment. The ARV is an essential factor in determining the value of a property to maximize profitability and return on investment (ROI). 

Use Comps to Help Understand ARV

The most reliable way to understand ARV is to pull real estate comps in the area to look for the current value of homes. Compare your property to homes that have recently sold in a one-mile radius and take into account: 

  • The price-per-square-foot
  • The renovated status of each comp
  • Features and similarities of your property to the comps

While there are shifts in the real estate market, understanding how your property compares to others in the area and the price-per-square-foot should help to better understand your return after the home has been renovated. 

ARV is Important to Lenders

ARV can be an important factor for lenders offering a loan to real estate investors. Lenders determine the maximum amount for an ARV loan based on the property’s value and repairs. Then, the lender-approved appraiser assesses the ARV to determine the final loan amount. 

Need Help With an Investment Property?

At Oak City Properties, we’ve streamlined the experience of purchasing and owning investment properties through a trusted and reliable mindset built on decades of measured success. Our team of real estate and investment professionals is ready to help you manage your most significant assets through a hands-on approach that focuses on consistently generating results. Want to learn more about our commitment to effective real estate investing and property management? Give us a call at (919)-232-9222 or check out our website: www.oakcityproperties.com

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