After Repair Value is the foundation of every real estate investment analysis. Whether you are flipping, doing BRRRR, or adding value to a rental property, getting the ARV right is the difference between profit and loss.
The ARV formula
$$\text{ARV} = \text{Average price of renovated comparable properties}$$
$$\text{Maximum Purchase Price} = (\text{ARV} \times 70%) - \text{Renovation Costs}$$
How to estimate ARV: step by step
Step 1: Find comparable sales (comps)
Your comps should be:
| Criteria | Ideal | Acceptable | Poor |
|---|---|---|---|
| Location | Same block or immediate area | Same neighbourhood (< 1 km) | Different neighbourhood |
| Sale date | Within 30 days | Within 3 months | Over 6 months ago |
| Size | Within 10% of your property (post-reno) | Within 20% | Over 20% difference |
| Condition | Renovated to similar level | Similar overall condition | Significantly different |
| Style | Same (detached to detached, etc.) | Similar | Different property type |
Step 2: Analyze the comps
| Comp | Address | Size | Sale Price | Notes |
|---|---|---|---|---|
| Comp 1 | Same street | 1,800 sq ft | $535,000 | Fully renovated, new kitchen/bath |
| Comp 2 | 2 blocks away | 1,750 sq ft | $520,000 | Renovated, slightly smaller yard |
| Comp 3 | Same neighbourhood | 1,900 sq ft | $545,000 | Renovated, extra parking |
| Average | $533,000 |
Step 3: Make adjustments
| Adjustment | Value |
|---|---|
| Subject property is 100 sq ft smaller than Comp 3 | −$12,000 |
| Subject property will have a better kitchen than Comp 2 | +$8,000 |
| Subject property has no garage (comps do) | −$20,000 |
| Adjusted ARV estimate | ~$509,000 |
The 70% rule explained
The 70% rule provides a quick maximum purchase price:
$$\text{Max Purchase Price} = (\text{ARV} \times 0.70) - \text{Repair Costs}$$
Why 70%?
The 30% buffer accounts for:
| Cost | Typical Percentage |
|---|---|
| Your profit | 10%–15% |
| Buying costs (land transfer tax, legal, inspection) | 2%–4% |
| Selling costs (agent commission, legal, staging) | 4%–6% |
| Holding costs (mortgage, taxes, insurance, utilities during reno) | 2%–5% |
| Contingency | 3%–5% |
| Total | ~25%–35% |
70% rule examples
| ARV | Repair Costs | Max Purchase Price | Profit Margin |
|---|---|---|---|
| $400,000 | $50,000 | $230,000 | ~$120,000 |
| $500,000 | $80,000 | $270,000 | ~$150,000 |
| $600,000 | $100,000 | $320,000 | ~$180,000 |
| $800,000 | $120,000 | $440,000 | ~$240,000 |
| $1,000,000 | $150,000 | $550,000 | ~$300,000 |
When to adjust the 70% rule
| Scenario | Adjusted Rule | Why |
|---|---|---|
| Hot market with fast sales | 75%–80% | Less holding time, lower risk |
| Slow market | 60%–65% | More holding time, higher carrying costs |
| Your first flip | 65%–70% | Build in extra margin for mistakes |
| Experienced flipper with contractor relationships | 75% | Lower renovation costs, faster execution |
| High-value market ($1M+ ARV) | 75% | Transaction costs are proportionally smaller |
Renovation costs and ROI
Typical renovation costs in Canada (2026)
| Project | Cost Range | ARV Impact | Typical ROI |
|---|---|---|---|
| Kitchen renovation | $15,000–$50,000 | +$20,000–$60,000 | 75%–120% |
| Bathroom renovation | $8,000–$25,000 | +$10,000–$30,000 | 80%–120% |
| Full interior paint | $3,000–$8,000 | +$5,000–$15,000 | 150%–200% |
| New flooring (whole house) | $8,000–$25,000 | +$10,000–$30,000 | 100%–130% |
| Basement finishing | $20,000–$60,000 | +$25,000–$50,000 | 60%–100% |
| Roof replacement | $8,000–$25,000 | +$5,000–$15,000 | 50%–70% (necessary, not value-add) |
| Window replacement | $10,000–$30,000 | +$8,000–$20,000 | 50%–70% |
| New HVAC | $5,000–$15,000 | +$3,000–$8,000 | 40%–60% (necessary, not value-add) |
| Landscaping | $3,000–$15,000 | +$5,000–$20,000 | 100%–150% |
| Curb appeal (new front door, lighting, driveway) | $3,000–$10,000 | +$5,000–$15,000 | 125%–175% |
Highest ROI renovations for flipping
- Paint and cosmetic updates — highest ROI, lowest cost
- Kitchen upgrades — buyers value kitchens above all else
- Bathroom updates — second most scrutinized room
- Flooring — transforms the feel of the entire home
- Curb appeal — first impressions drive the emotional response
ARV worksheet
Use this to calculate your deal:
| Item | Amount |
|---|---|
| Estimated ARV | $ ________ |
| Purchase price | $ ________ |
| Renovation budget | $ ________ |
| Contingency (15% of reno) | $ ________ |
| Buying costs (land transfer tax, legal, inspection) | $ ________ |
| Holding costs (mortgage, taxes, insurance × months) | $ ________ |
| Selling costs (commission, legal, staging) | $ ________ |
| Total costs | $ ________ |
| Projected profit (ARV − total costs) | $ ________ |
| ROI (profit ÷ total investment × 100) | ________% |
Example deal analysis
| Item | Amount |
|---|---|
| ARV | $530,000 |
| Purchase price | $370,000 |
| Renovation | $60,000 |
| Contingency (15%) | $9,000 |
| Buying costs (LTT $4,475 + legal $2,000 + inspection $500) | $6,975 |
| Holding costs (6 months × $2,800 mortgage + $300 tax + $200 insurance + $300 utilities) | $21,600 |
| Selling costs (5% commission + legal $1,500 + staging $3,000) | $31,000 |
| Total invested | $498,575 |
| Projected profit | $31,425 |
| ROI | 7.1% (over ~8 months) |
This deal works but the margin is thin. Finding the property for $350,000 instead of $370,000 would improve profit to $51,425 (11.5% ROI).
Common ARV mistakes
- Using comps that are too far away — one block can make a huge difference
- Using sold prices from more than 3 months ago — markets change
- Overestimating your renovation level — if comps have high-end finishes and your budget only allows mid-range, your ARV estimate is inflated
- Ignoring negative adjustments — busy street, no parking, smaller lot all reduce ARV
- Cherry-picking the highest comp — use the average or conservative end of the range
- Underestimating renovation costs — always add 15%–20% contingency
- Forgetting holding and transaction costs — these can eat 8%–12% of ARV
ARV for BRRRR investors
For BRRRR (Buy, Rehab, Rent, Refinance, Repeat) investors, ARV determines your refinance amount:
| Step | How ARV Applies |
|---|---|
| Buy | Purchase below market value |
| Rehab | Renovate to increase value to ARV |
| Rent | Tenant generates rental income |
| Refinance | Lender appraises at ARV — refinance at 80% LTV to pull out invested capital |
| Repeat | Use recovered capital for the next property |
Example: Purchase at $350K, invest $60K in reno, ARV is $530K. Refinance at 80% LTV = $424K mortgage. You recover $424K − $0 (original mortgage paid off during refinance) = your capital back plus equity retained.