WHAT IS AFTER REPAIR VALUE OR ARV?
After Repair Value is a calculation performed by real estate investors and residential hard money lenders when evaluating a rehab project or potential flip. "Flipping" homes frequently requires repairs in order to obtain conventional financing for your end buyer. The ARV (After Repair Value) is simply what the house would sell for if it were repaired and in average condition for the area.
It is important that investors do not miscalculate ARV, because it determines whether or not the project is going to be equitable or not. One should consider being very conservative on this value to insure your profit margins are real, and leave you room for cost over runs.
Real Estate agents are an excellent source for calculating ARV by creating a CMA (current market analysis) for your project. Agents will typically do this for free if you agree to work with them when you find the right property. Of course appraisers are the first choice and will charge for this service unless you have an established relationship.
You can calculate ARV yourself if you know the local market, and have access to public records or MLS records. You need an adequate amount of comparable sales that are recent for that particular location. A good rule of thumb is to find 3-4 comparable homes that sold in the past 3 months, and within a mile.
If you already know the ARV for a project you have in mind, you should.