Calculating After-Repair Value (ARV) for Your BRRRR Projects

Understanding how to calculate after repair value is the single most important skill for BRRRR investors. Your ARV determines your maximum purchase price, guides your rehab budget, and predicts your refinance proceeds. Get it wrong, and even perfect execution won't save a bad deal.

This comprehensive guide teaches you the proven ARV formula BRRRR investors use, how to find accurate real estate comps for ARV, and how to apply the 70 rule real estate investors rely on for profitable deals in the BRRRR method Illinois market.

What is ARV? The #1 Metric That Makes or Breaks Your BRRRR Profitability

After-Repair Value (ARV) represents what your property will be worth after completing all planned renovations. It's the cornerstone of every BRRRR analysis and directly impacts your ability to recover capital through refinancing.

ARV in the BRRRR Context

In BRRRR investing, ARV serves multiple critical functions:

Determining Maximum Purchase Price

Your ARV, combined with rehab costs, tells you the maximum you can pay for a property. Using an investment property value estimator approach like the 70% rule, you work backward from ARV to find your purchase ceiling.

Guiding Rehab Investment

ARV helps you decide which improvements are worth making. If an upgrade costs more than the value it adds, you shouldn't do it—regardless of how nice it would be.

Predicting Refinance Proceeds

Your refinance is based on the appraised value (which should match your ARV if calculated correctly). At 75% LTV, a $200,000 ARV yields $150,000 in refinance proceeds. A $180,000 ARV yields only $135,000—a $15,000 difference that could leave capital trapped in the deal.

Validating Deal Profitability

Accurate ARV, combined with true costs, reveals whether a deal actually works. Many "deals" fall apart under proper ARV analysis.

The Relationship Between ARV and Other BRRRR Metrics

ARV connects directly to your key investment metrics:

• Cash-on-Cash Return: If ARV is lower than expected, you recover less capital, increasing the cash left in the deal and reducing returns.
• Equity Position: ARV minus your loan balance equals your equity—higher ARV means more equity and greater financial flexibility.
• DSCR Cushion: Properties that appraise at higher ARVs often refinance at lower LTVs relative to income, improving DSCR ratios.

The 3-Step Formula for a Rock-Solid ARV Calculation (Every Single Time)

Professional investors follow a systematic process to calculate ARV. Here's the proven three-step approach:

Step 1: Identify Comparable Properties (Comps)

The foundation of accurate ARV is finding the right comparable sales. Look for properties that match your subject property after renovation.

What Makes a Good Comp

• Location: Ideally within 0.5 miles, and never more than 1 mile unless in rural areas. Same neighborhood or subdivision is best.
• Recency: Sold within the last 3-6 months. In rapidly changing markets, more recent is better.
• Property Type: Same property type (single-family, duplex, etc.) and similar style (ranch, two-story, etc.).
• Size: Within 15-20% of your property's square footage. A 1,500 sq ft home isn't a good comp for a 2,400 sq ft home.
• Condition: Similar condition to what your property will be after renovation—not distressed sales.
• Bedroom/Bathroom Count: Same or very similar configuration.

How Many Comps Do You Need?

Use 3-5 strong comps for reliable ARV estimation. If you can only find 1-2 true comparables, your ARV estimate carries more risk.

Step 2: Adjust for Differences

No two properties are identical. Adjust comp sale prices to account for differences between the comp and your subject property.

Common Adjustments

• Square Footage: Typically $30-100 per square foot depending on market. If a comp is 200 sq ft larger, subtract that value from its sale price.
• Bedrooms/Bathrooms: Additional bedrooms add $5,000-15,000; bathrooms $3,000-10,000 depending on market.
• Garage: Garage vs. no garage can be worth $10,000-30,000.
• Lot Size: Larger lots add value, typically $1-5 per square foot of lot.
• Age/Updates: Newer construction or recent updates may require downward adjustments if your property is older.
• Features: Pools, finished basements, and other features require adjustments.

"If the comp is superior to your subject property in some way, subtract value. If the comp is inferior, add value. You're adjusting the comp to match your subject."

Step 3: Calculate the Final ARV

After adjusting all comps, calculate your ARV using this approach:

1. Eliminate any outliers (unusually high or low adjusted values)
2. Calculate the average of remaining adjusted comp values
3. Consider weighting more recent or more similar comps more heavily
4. Round to a realistic figure (properties don't sell for $187,432—round to $185,000 or $190,000)

Example ARV Calculation

Subject property: 3 bed, 2 bath, 1,400 sq ft home after renovation

Comp	Sale Price	Adjustments	Adjusted Value
Comp 1	$185,000	+$6,000 (smaller)	$191,000
Comp 2	$195,000	-$8,000 (larger, garage)	$187,000
Comp 3	$182,000	+$5,000 (no basement)	$187,000
Average			$188,333 → $188,000

Conservative ARV estimate: $185,000-$188,000

Beyond the Basics: Finding Accurate Comps in the Illinois Market

Finding quality comps in the Illinois market requires knowing where to look and how to evaluate the data you find.

Data Sources for Illinois Comps

MLS Access

The Multiple Listing Service provides the most comprehensive and accurate sales data. Access through:

• Working with a licensed real estate agent
• Propstream, PropMix, or similar investor platforms that aggregate MLS data
• Some MLS systems offer direct investor access for a fee

Public Records

Illinois county assessor and recorder websites provide sale prices, though often with slight delays:

• Cook County Assessor for Chicago area properties
• Individual county assessor sites for other metros
• Aggregators like Zillow, Redfin, and Realtor.com compile public records

Investor Platforms

Specialized platforms for real estate investors often provide enhanced comp data:

• PropStream
• BatchLeads
• DealMachine
• Privy

Illinois-Specific Considerations

The Illinois market has unique characteristics affecting comp analysis:

Property Tax Impact

Illinois has some of the nation's highest property taxes. Buyers factor this into their offers, so high-tax areas may see lower sale prices than comparable properties in lower-tax areas.

Neighborhood Variability

Illinois cities, especially Chicago, have significant neighborhood-by-neighborhood variation. A block can make a $50,000 difference. Never use comps from adjacent but different neighborhoods.

Seasonal Patterns

Illinois real estate shows strong seasonality. Spring and summer sales often outpace fall and winter. Adjust expectations accordingly and prefer seasonal-appropriate comps.

School District Boundaries

School districts significantly impact values. Verify your property and comps fall within the same district boundaries.

Using the 70% Rule for BRRRR

The 70 rule real estate provides a quick screening formula for BRRRR deals. It helps you quickly determine whether a property is worth deeper analysis.

The Formula

Maximum Purchase Price = (ARV × 70%) - Estimated Repair Costs

Example Application

• ARV: $200,000
• Estimated Repairs: $40,000
• Maximum Purchase: ($200,000 × 0.70) - $40,000 = $100,000

When to Adjust the Percentage

• Lower (65%): For higher-risk deals, first-time investors, or uncertain markets
• Higher (75%): For experienced investors in stable markets with accurate cost estimates

The 70% rule builds in margin for holding costs, closing costs, unexpected expenses, and profit. It's a screening tool, not a substitute for detailed analysis.

Avoid These 5 Deadly ARV Mistakes That Crush Your Investment Returns

Even experienced investors sometimes make ARV errors that destroy deal profitability. Learn to recognize and avoid these common mistakes.

Mistake 1: Using Retail Renovation Comps

A homeowner who spent $150,000 on a luxury renovation isn't a valid comp for your investor-grade rehab. Your property will have:

• Durable but not luxury finishes
• Standard (not premium) appliances
• Functional but not custom features

Compare to similar investor-quality renovations, not dream home makeovers.

Mistake 2: Ignoring Location Micro-Differences

Properties one block apart can have significantly different values based on:

• Busy street vs. quiet street
• Corner lot vs. interior lot
• Proximity to commercial or industrial use
• View or aesthetic differences
• School district boundaries

Always verify comps are truly comparable locations, not just nearby addresses.

Mistake 3: Using Outdated Comps

Markets change. A sale from 12 months ago may not reflect current values. Prioritize:

• Sales within the last 3 months (ideal)
• Sales within 6 months (acceptable)
• Adjust older sales for market changes if used

In rapidly appreciating or declining markets, even 3-month-old data may need adjustment.

Mistake 4: Wishful Thinking

It's tempting to assume your renovation will create more value than comparable projects. Resist this urge:

• Use conservative comp selections
• Don't assume "premium" finishes justify premium pricing
• Verify your rehab plans match the level of finished comps
• When in doubt, use the lower end of your ARV range

Mistake 5: Ignoring Market Conditions

ARV isn't static—it reflects current market conditions. Consider:

• Days on Market: Are comparable listings selling quickly or sitting?
• List-to-Sale Ratio: Are properties selling at, above, or below asking prices?
• Inventory Levels: Is supply increasing or decreasing?
• Interest Rate Trends: Rising rates reduce buyer purchasing power
• Local Economic Factors: Job growth, population trends, and major employers

Putting ARV Into Practice

Accurate ARV calculation is a skill that improves with practice. For every property you analyze:

1. Document your comp selection and adjustments
2. Track your predicted ARV vs. actual appraised value
3. Analyze why predictions were accurate or missed
4. Refine your approach based on results

Over time, you'll develop intuition for your target markets that supplements systematic analysis.

For more on applying ARV to complete deal analysis, see our guides on finding undervalued properties and rehab budgeting.