What Does ARV Mean in Real Estate?

What Does ARV Mean?

In real estate, ARV stands for "After Repair Value." This term refers to the estimated value of a property after it has undergone necessary repairs and renovations. ARV helps real estate investors calculate the potential profit margin by estimating the property's market value post-rehabilitation. This calculation helps determine the feasibility and budgeting of a renovation project to ensure that the investment will yield a favorable return.

Investors use ARV to calculate the maximum allowable offer (MAO) for a property by considering repair costs, holding costs, and their desired profit margin.

The formula to estimate ARV is:

ARV = Purchase Price + Value of Renovations/Repairs

Investors often compare ARV to similar properties (comparables) that have recently sold in the same area to ensure their estimate is accurate.