Prestige Investor Series · Volume 002

Understanding ARV

How to build a resale assumption from relevant renovated comparable sales.

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After-repair value, explained

Start with a decision you can defend.

ARV anchors the revenue side of a fix-and-flip model. Because purchase price, financing, and projected profit can all depend on it, the estimate should come from observable market evidence—not the number the deal needs in order to work.

ARV is an estimate, not an appraisal or guarantee of resale value. Local market conditions and the completed work can change the outcome.

01

Define the finished property

ARV is the expected market value after the planned renovation is complete—not today’s value plus a generic improvement premium. Write down the finished bed and bath count, square footage, condition, layout, parking, lot, and major systems before selecting comparable sales.

  • Treat unpermitted or uncertain additions cautiously
  • Match the finish level to what the local market rewards
  • Separate necessary repairs from value-creating changes
02

Build a relevant comparable set

Start with recent closed sales of renovated properties that a likely buyer would reasonably compare with the subject. The same neighborhood is useful, but similarity in property type, size, condition, and buyer appeal matters more than drawing an arbitrary radius.

  • Prefer closed sales over active listings
  • Use the most recent evidence available
  • Explain why every comparable belongs in the set
03

Adjust instead of averaging

A simple average can hide meaningful differences. Consider how the market responds to square footage, bedroom and bathroom count, parking, basement utility, lot characteristics, condition, and location. Make only adjustments you can explain with market evidence; false precision is not the goal.

  • Give more weight to the most similar sales
  • Document material differences
  • Do not assume renovation cost equals added value
04

Choose a range, then underwrite

Comparable evidence usually supports a range rather than one unquestionable number. Record a conservative, base, and stronger case. Use a supportable case for the working model, then test what happens if the resale lands near the low end.

  • State the date of the analysis
  • Keep links or records for each sale
  • Revisit ARV when scope or market evidence changes

Before you move forward

Your ARV file should answer five questions.

  1. 01

    What exactly will the property be when renovation is complete?

  2. 02

    Which recent closed sales compete most directly with that finished product?

  3. 03

    What material differences require an adjustment or different weighting?

  4. 04

    What conservative, base, and stronger value cases does the evidence support?

  5. 05

    Does the deal still make sense if resale lands near the conservative case?

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