ARV for fix and flip
On a flip, ARV is the only revenue line in the entire project — every cost is measured against it and every error in it lands directly on profit. Set it from sold comps renovated to the standard you will actually deliver, then check that the ARV is large enough to carry not just the purchase and the rehab but the holding costs, the selling costs, and your margin. A 5% ARV miss on a healthy flip moves profit by more than 20% — and by over 40% on a thin one — because the error hits revenue while every cost stays exactly where it was.
Match the comps to the scope, not the scope to the comps
The single decision that sets a flip's ARV is which finish level you comp against, and it has to be the level you are genuinely going to deliver. Three tiers exist in most neighborhoods, and they don't blend:
| Tier | Typical scope | Comp against |
|---|---|---|
| Cosmetic refresh | Paint, flooring, fixtures, appliances, landscaping | Clean, updated sales — not full renovations |
| Full cosmetic renovation | New kitchen and baths, floors throughout, paint, mechanicals serviced | Recent finished flips in the same area |
| Renovation plus reconfiguration | The above plus walls moved, a bath or bedroom added, systems replaced | Comps at the new bed/bath count, which may be a different comp set entirely |
Comping a cosmetic refresh against full flips is how a $28,000 budget gets paired with a $60,000 value increase on paper. The reverse error — a full renovation comped against tired sales — is rarer but costs you the deal by making it look unprofitable when it isn't.
What the ARV actually has to carry
A 1,600 ft² house, ARV $385,600 from a median comp of $241/ft², purchased at $210,000 with a $55,000 renovation over a five-month hold. The renovation is not the only thing between purchase and profit:
| Line | Amount | Note |
|---|---|---|
| Sale price (ARV) | $385,600 | The only revenue line in the project |
| Purchase price | −$210,000 | |
| Renovation | −$55,000 | Before contingency |
| Buying costs | −$4,500 | Title, inspection, transfer, lender fees at purchase |
| Holding costs, 5 months | −$14,500 | Loan interest, taxes, insurance, utilities |
| Selling costs | −$23,140 | Commission and closing, 6% of the sale |
| Net profit | $78,460 | 20.3% of ARV |
The $175,600 gap between the purchase price and the ARV looks enormous. After the renovation and the $42,140 of costs that have nothing to do with the renovation, $78,460 of it is actually yours — which is why "ARV minus purchase minus rehab" is not a profit calculation, however often it gets used as one.
Model the whole project
Purchase, rehab, holding and selling costs against the ARV, with net profit, ROI on cash invested, and margin — so you can see which line is actually deciding the deal.
Open the flip profit calculatorWhy a 5% ARV miss costs 30% of the profit
Hold every cost in the table above constant and move only the ARV. The revenue changes; the purchase, the renovation, the holding, and most of the selling costs do not.
| Actual ARV | Selling costs (6%) | Net profit | Change |
|---|---|---|---|
| $366,300 (−5%) | −$21,980 | $60,320 | −23% |
| $385,600 (base) | −$23,140 | $78,460 | — |
| $404,900 (+5%) | −$24,290 | $96,610 | +23% |
A 5% error in the ARV swings profit by 23% on a deal with a healthy margin. On a thinner deal — a $300,000 ARV with $35,000 of expected profit — the same 5% error moves profit by more than 40%, and a 10% error leaves under $7,000 for five months of work and risk. That asymmetry is the whole argument for comping conservatively: the upside of an optimistic ARV is a slightly better-looking spreadsheet, and the downside is the deal.
Four questions before you commit to the number
- Has anything actually sold at this ARV? Not per square foot — in total dollars. If your $404,000 ARV sits above every sale in the neighborhood, you are betting on setting a record.
- Would an appraiser accept your comp set? They'll want three closed sales, within a mile, within six months, similar in size and style. If your set only works with a twelve-month window, expect trouble at the end.
- What's the days-on-market at this price point? Your holding cost assumption is a market statistic, not a preference. If comparable finished houses take 70 days to go under contract, a two-month hold is optimistic before you've swung a hammer.
- What is above and below you? If the price band just under yours is thick with inventory, your buyer has alternatives. That doesn't change the ARV; it changes how long you'll wait for it.
Where to go next
The method itself is in how to calculate ARV. The offer that falls out of it is how to calculate MAO. And if you're wondering why your lender's valuation disagrees with yours, ARV vs market value explains which number each party is using.
Common questions
What ARV should I use if my renovation is better than the comps?
The comps', with a small premium at most. Over-improving relative to a neighborhood is the classic way to spend $40,000 and recover $15,000: buyers price against what else is available, and a kitchen nicer than anything else on the street mostly buys you a faster sale rather than a higher one. If nothing in the area has sold at the level you're planning, that is evidence the level doesn't pay there.
How much profit should a flip make?
The common floors are 10–15% of ARV, or $25,000–$35,000 in absolute terms, whichever is larger — and the absolute floor matters most on cheap houses, where 12% of a $150,000 ARV is $18,000 for six months of work and real risk. The 70% rule is a shortcut that reserves 30% of ARV for holding, selling, and profit combined, which lands near those numbers once costs are paid.
Should ARV assume a fast sale or a slow one?
ARV assumes a normal, properly marketed sale — that's what your comps represent. Speed belongs in the holding-cost line, not in the ARV. If you need a fast exit, model more months of holding costs or a price reduction as a separate scenario; don't quietly discount the ARV and lose track of why.
Does an appraisal have to match my ARV?
If your buyer is financing, effectively yes. A retail buyer with a mortgage needs an appraisal at or above the contract price, and appraisers use the same neighborhood sales you did. An ARV built on comps an appraiser would also accept is the one that survives to closing; one built on the two best sales in the area is where deals fall apart three weeks before the end.
Related guides and calculators
How to calculate ARV
The five-step method, with a worked example and the adjustment table most investors skip.
How to calculate MAO
The maximum allowable offer formula, both versions, and how to pick the percentage honestly.
ARV vs market value
Two different numbers on the same house — where the gap comes from and who uses which.
How to find real estate comps
Where the sold data actually lives, and the six filters that separate a comp from a nearby house.
Underwrite the flip before you bid.
Faro values any address from real comparable sales and shows the price you'd have to buy at to hit the return you're targeting.
Estimates for analysis and educational use only — not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.