Every flip lives or dies on one number: the after-repair value, or ARV. Your offer price, rehab budget, and loan amount all hang off it. Get it wrong by 10% and a good deal turns into a break-even one, or worse.
I look at comps every week as an agent and as a lender. Here’s how to do it right.
What ARV actually is
ARV is what the property will realistically sell for after your renovation is complete, in the current market, to a normal retail buyer.
Not what Zillow says. Not what the nicest house on the street sold for. Not what you hope it’ll sell for. What a buyer will pay for your finished product.
Step 1: Define your finished product first
Before you pull a single comp, decide what you’re building. Bed/bath count, square footage, finish level (builder-grade or high-end), and any layout changes.
A 3/1 that you’re turning into a 3/2 should be compared to 3/2s, not 3/1s. Your scope of work and your ARV have to match.
Step 2: Pull the right comps
Good comps are:
- Sold, not listed. Asking prices are opinions; closed sales are facts.
- Recent, ideally within the last 3 to 6 months. In a shifting market, the last 90 days matter most.
- Close: same neighborhood, and ideally the same side of any major road, school boundary, or creek. In Austin, crossing one street can change values a lot.
- Similar: similar size (within about 15–20% of square footage), age, lot, bed/bath count, and style.
- Renovated. You’re estimating value after rehab, so compare to updated homes, not other fixers.
Aim for three to five strong comps. One great comp beats five bad ones.
Step 3: Adjust for differences
No comp is identical. Adjust up or down for the big things:
- Square footage (use price per square foot from your best comps, not an area average)
- Extra bedroom or bathroom
- Garage vs. no garage
- Lot size, pool, view, backing to a busy road
- Finish level compared to what you’re planning
Be honest about the negatives. If your house backs to a busy road and the comps don’t, your ARV is lower. Period.
Step 4: Sanity-check with active and pending listings
Look at what’s on the market now and what’s under contract. Actives are your competition when you list. If there are six renovated homes sitting at your target price for 60+ days, that’s telling you something.
Pendings show you where the market is heading before those sales show up as comps.
Step 5: Get a second opinion
Ask a local agent who actually sells in that neighborhood. They’ll know things that don’t show up in data, like the comp that sold high because of a bidding war, or the one that sold low because it had a foundation issue.
This is exactly what we do on every loan: run the comps ourselves and cross-check with someone who knows the area.
The mistakes that kill deals
- Using the highest comp as your ARV. That’s the ceiling, not the target.
- Comparing to new construction. A renovated 1970s house doesn’t sell like a new build next door.
- Ignoring days on market. A comp that took 120 days to sell tells you about demand, not just price.
- Over-improving. Putting a $90K kitchen in a neighborhood that tops out at mid-range finishes won’t move your ARV the way you hope.
- Stale comps in a moving market. Six-month-old sales can be wrong when rates or inventory have shifted.
How ARV ties to your financing
Hard money lenders typically size fix-and-flip loans off ARV, capping total leverage at a percentage of the after-repair value. If your ARV is inflated, two things happen: the lender’s number comes in lower than you expected, and your real profit is thinner than your spreadsheet says.
A conservative ARV protects you. If the house sells for more, great. That’s bonus profit, not the plan.
Quick formula to start from
A common rule of thumb flippers use as a starting point:
Max offer ≈ (ARV × 70%) − rehab costs
It’s not gospel. Margins depend on the market, price point, and your holding and financing costs. But it’s a decent first filter before you dig into a full analysis.
Want a second set of eyes?
If you’ve got a deal and want someone to look at your comps and numbers, send it over. That’s literally what I do all day.
Related: What is a hard money loan?
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