How to Calculate ARV (After-Repair Value): The Wholesaler's Formula
If you get one number wrong in a wholesale deal, make it any number except ARV. ARV is the spine of the whole analysis — your offer, your assignment fee, and whether the cash buyer at the end of the chain actually closes all hang off it. Overshoot it by 8% and your "$30K spread" quietly becomes a $5K spread that nobody wants to buy.
Full disclosure: I work for ReadySMS, so I spend most of my day on the outreach side of wholesaling — the dialer and text campaigns that fill the pipeline. But you can't run good outreach on top of bad math. A list of motivated sellers is worthless if you're mispricing every deal you analyze. So this is the deal-analysis piece, written plainly.
What ARV actually means
After-Repair Value is what a property will sell for after it's fully renovated to the standard of the neighborhood — not what it's worth today, and not what the seller thinks it's worth because they put in granite counters in 2009.
The formula everyone repeats is simple:
ARV = average price per square foot of comparable renovated sales × subject property square footage
That's the skeleton. The whole game is in picking the right comps and adjusting them honestly. Get sloppy on either and the formula gives you a confident, precise, wrong answer.
Step 1: Pull the right comps
A comp is only useful if a real buyer would have genuinely considered it interchangeable with your subject property. The tighter your filters, the more defensible your number.
Start with these hard filters:
- Sold, not listed. Closed sales in the last 3–6 months. Active listings tell you asking prices (sellers' fantasies); sold tells you what buyers actually paid.
- Distance: within 0.5 miles in a dense suburb, tighter in a city, looser in rural areas. Never cross a major road, school district line, or railroad track if the neighborhoods on each side price differently.
- Square footage: within ±20% of the subject. A 1,200 sqft house is not comparable to a 2,400 sqft house on a $/sqft basis — the smaller home almost always carries a higher per-foot price.
- Same property type, same story count, similar bed/bath, similar lot.
- Renovated condition. This is the one people skip. You want comps that sold in the finished condition you're projecting, because that's your exit. A tired fixer that sold last month is a seller comp, not an ARV comp.
Pull at least 3 solid comps. Six is better. If you can only find one, you don't have an ARV — you have a guess.
Step 2: Calculate $/sqft and average it
Take each renovated comp's sale price, divide by its square footage, and average the results.
Worked example. Say you find three renovated sales near your subject:
| Comp | Sale price | Sqft | $/sqft |
|---|---|---|---|
| A | $312,000 | 1,560 | $200.00 |
| B | $298,500 | 1,490 | $200.34 |
| C | $325,000 | 1,680 | $193.45 |
Average $/sqft = (200.00 + 200.34 + 193.45) / 3 = $197.93/sqft
Your subject is 1,600 sqft. Base ARV = 1,600 × $197.93 = $316,688, call it $316,700.
That's your starting number — before adjustments. Don't stop here.
Step 3: Adjust for the differences
No two houses are identical, so you nudge the number for real, dollar-quantifiable differences between your comps and the subject. The point isn't precision to the penny; it's avoiding obvious distortions.
Common adjustments and rough rule-of-thumb values (these vary wildly by market — calibrate to yours):
- Extra bathroom: ±$5,000–$15,000
- Extra bedroom (added sqft): already partly captured in $/sqft; adjust if config is unusual
- Garage vs. no garage: ±$5,000–$20,000
- Pool: +$10,000–$30,000 in warm markets, sometimes a negative in cold ones
- Lot size / corner lot / view: market-dependent
- Updated mechanicals (roof, HVAC) vs. original: these affect rehab cost more than ARV, but a buyer notices
If your subject has no garage and all three comps had one, knock the base number down. If two of three comps had pools and yours won't, adjust down for those two before averaging — or weight the no-pool comp more heavily.
The discipline: adjust the comps toward the subject, not the subject toward the price you want. That second move is how wholesalers talk themselves into bad deals.
Step 4: The 70% rule and your Maximum Allowable Offer
Once you trust your ARV, the 70% rule gives you a ceiling on what to pay.
MAO = (ARV × 0.70) − repair costs − your assignment fee
The 0.70 is the cash buyer's margin buffer — it covers their profit, holding costs, closing costs, and Realtor commissions on the resale. Some markets run 75% on the hot end and 65% when things are soft. Use 70% as default.
Worked example with our $316,700 ARV:
- ARV × 0.70 = $221,690
- Estimated rehab = $45,000
- Your target assignment fee = $15,000
- MAO = $221,690 − $45,000 − $15,000 = $161,690
So your max offer to the seller is roughly $161,700. Offer below that to leave negotiating room. If the seller won't go under $185,000, the deal's dead at a $15K fee unless your rehab estimate was high or the ARV climbs — and you don't move the ARV to save the deal.
Quick sanity check on the spread: your cash buyer pays $161,700 + assignment, puts in $45K, and sells around $316,700. That leaves them roughly $95K of gross room before commissions and holding. That's a deal a buyer will actually take your call about.
Step 5: Common ARV mistakes that kill deals
I've watched plenty of new wholesalers do the math correctly on the wrong inputs. These are the repeat offenders:
- Using active listings as comps. Asking ≠ sold. A neighbor listing high doesn't raise your ARV one dollar.
- Stale comps. Sales older than 6 months in a moving market are noise. In a fast-shifting market, even 90 days is pushing it.
- Comping across an invisible line. Two streets, same look, $40/sqft apart because one feeds a better school. The map doesn't show it; the sold prices do.
- Ignoring condition. Comping renovated exits against fixer sales — in either direction — wrecks the number.
- Reverse-engineering the ARV to fit the offer. The most expensive mistake. You decide you want the deal, then go find comps that justify it. Run the comps first, let the number land where it lands.
- Forgetting the buyer's exit costs. The 70% buffer exists for a reason. Skip it and you'll wholesale "deals" no investor wants.
When you're unsure, default to the conservative ARV. A deal that's secretly better than your spreadsheet is a happy surprise. A deal that's secretly worse is a blown assignment and a burned buyer relationship.
Speed matters as much as accuracy
Here's the operator reality: you'll analyze 40 deals to do one. So the goal isn't a flawless 90-minute appraisal on every lead — it's a defensible 10-minute ARV that's right often enough to make offers fast. Build a simple comp template, keep your adjustment values written down so you're consistent, and trust the process more than your gut on any single property.
Speed on the front of the funnel matters just as much. The wholesaler who reaches a motivated seller first usually wins the deal, which is why most serious operators pair instant text follow-up with an auto-dial on new leads. If you're building that side out, we've written up the cheapest compliant SMS setup for wholesalers and a piece on splitting cold and warm outreach between the dialer and SMS — because cold-list texting without scrubbing is how you trade a thin spread for a fat TCPA problem. If you're working cold property-owner lists, run them through a DNC and litigator scrub before you blast.
The practical takeaway
ARV is comps × $/sqft, adjusted honestly, sanity-checked against the 70% rule. The formula is easy. The discipline — pulling sold-and-renovated comps, adjusting toward the subject, and refusing to bend the number to save a deal — is the part that separates wholesalers who keep their buyer lists from the ones who don't.
Nail the math, then go feed the pipeline. The deals you analyze are only as good as the seller conversations you start, and the operators who answer first tend to be the ones still in business in three years. If outreach is your bottleneck, that's the half we can actually help with — start with the wholesaler SMS setup guide and build from there.