After-Repair Value (ARV)
Definition
After-Repair Value (ARV) is the estimated market value of a property after all planned renovations and improvements have been completed. ARV is a critical metric in real estate investing and hard money lending because it determines how much a lender is willing to finance. Most hard money lenders will lend up to 65–75% of the ARV. Calculating ARV involves analyzing comparable sales (comps) of recently sold, fully renovated properties in the same area. A higher ARV relative to purchase price and renovation costs indicates a more profitable investment opportunity.
Example
An investor purchases a property for $200,000 and plans $80,000 in renovations. Based on comparable sales, the ARV is estimated at $380,000. A hard money lender offers to fund 70% of ARV = $266,000, which covers the purchase price and most renovation costs.
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