An ARV loan is a fix-and-flip or rehab loan sized against a property’s after-repair value rather than its current condition, letting investors borrow against what a house will be worth once renovated. Flippers and rehab investors use these loans to fund purchase and construction in a single package. Headline leverage often reaches a high portion of ARV, though your actual number depends on the deal, the market, and the lender’s own underwriting cap.
TL;DR:
- Proper ARV estimation must rely on recent, comparable sales within close proximity to avoid overpaying or underestimating deal value.
- Lenders typically cap the loan at 70% to 80% of ARV, with actual funding dependent on deal specifics, credit, and experience.
- Accurate ARV calculation involves selecting credible comps, building a detailed rehab budget, and reconciling these for a defensible figure before making an offer.
- Borrowers should verify ARV estimates with lenders early in the process to prevent deal failures caused by discrepancies between projected and actual property value.
- Speed of funding and draw release timing significantly impact project economics, with faster closings typically costing a premium but better securing competitive deals.
After-repair value is the estimated resale price of a property once renovations are complete, calculated by pulling comparable sales and layering in the expected value added by your rehab work. Say you buy a distressed house for $180,000, put $60,000 into a kitchen and bath overhaul plus new systems, and comparable renovated homes nearby sell for $320,000. That $320,000 is your ARV, and it becomes the anchor figure for both your offer price and your loan request.
Current market value tells you what the house is worth today, in its current state. ARV tells you what it will be worth after you’ve done the work. Investors who confuse the two routinely overpay, because a rehab loan and a resale strategy both depend on the future number, not the present one.
Wall Street Prep’s breakdown of the ARV formula and calculator is a solid reference if you want to see the math laid out mechanically before applying it to your own deal.
Private lenders don’t just look at what a property costs today. They look at three ratios, and each one answers a different question in the underwriting process.
Loan-to-ARV (LTARV) caps your total loan (purchase plus rehab funds) as a percentage of the finished value. Loan-to-value (LTV) caps the loan against the property’s current, as-is value. Loan-to-cost (LTC) caps it against your total project cost, purchase plus renovation budget combined. A lender might quote LTARV as the headline number, but they’re usually checking your deal against all three before issuing terms.
Once a lender sets your LTARV cap, they don’t hand you the full rehab budget on day one. Instead, rehab funds get released through a draw schedule, typically tied to inspection milestones as work is completed. This protects the lender and, frankly, protects you from overextending on labor and materials before the work is verified.
Rocket Mortgage’s overview of how ARV factors into renovation lending explains why lenders lean on this figure rather than current value when the property needs substantial work.
Calculating ARV isn’t guesswork if you follow a consistent process. Here’s the workflow experienced flippers use.
Statistic Callout: BiggerPockets’ guidance on the comparable-sales approach to ARV treats a tight, well-matched comp set as the most reliable method available to investors, more dependable than automated valuation tools or a single agent’s opinion.
Here’s the math on that ARV example: multiply the ARV by a commonly used percentage, then subtract your rehab budget to estimate your maximum offer. Pay more than that and you’re eating into your margin before you’ve swung a hammer.
Common traps: using comps that are too far away or too old, forgetting holding costs and closing costs in your rehab estimate, and anchoring on a single optimistic comp instead of a cluster.
Loan structures vary by lender, but a few patterns show up consistently across the private lending market. Many programs fund purchase price plus a rehab holdback, with the rehab portion released in draws as work is verified. Leverage against ARV commonly lands in the 70% to 80% range as an underwriting cap, though that ceiling is often a maximum, not a guaranteed funded amount — actual proceeds depend on your specific deal, credit profile, and experience level.
Pro Tip: Ask a lender how many days their draw inspections typically take before you sign anything. A lender who takes two weeks to release funds after inspection can quietly cost you a month on a tight flip timeline.
Faster closings and appraisal-waived underwriting tend to carry a pricing premium, but that premium is often worth it when speed protects your purchase contract or lets you beat competing offers. Our short-term real estate loan guide breaks down how term length interacts with pricing across different loan types.
Optimistic ARV estimates are the single biggest reason flips lose money. Markets shift between your purchase date and your resale date, and appraisers don’t always agree with your comp selection, especially in areas with thin recent sales data.
Our breakdown of fix-and-flip financing mistakes covers several of these in more depth, with specific dollar examples of how they play out.
Capital Funding has closed more than $1 billion in loans as a direct private lender backed by a family office, and carries an A+ rating with the Better Business Bureau. That track record matters here because ARV underwriting isn’t theoretical. It plays out loan by loan, with real comps, real rehab budgets, and real deadlines.
A recent example: a $1,075,000 loan Capital Funding closed shows how a well-documented rehab budget and a defensible ARV estimate move a deal from application to funded loan without the delays that sink weaker submissions.
The takeaway for investors preparing their own submission: come to the table with reconciled comps, a line-item rehab budget, and a realistic timeline. Lenders move fastest on deals where the numbers already tell a coherent story. Our guide on how lenders evaluate flip projects walks through the underwriting checklist in more detail.
If I had to boil down every ARV financing mistake I’ve seen into one lesson, it’s this: the deals that fall apart almost never fall apart because of the loan terms. They fall apart because the borrower’s ARV number and the lender’s ARV number never matched in the first place.
Get three things right before you submit anything. First, build your ARV off comps a stranger would find credible, not the three best sales you could dig up. Second, price your rehab budget like a contractor will see it, because one will. Third, talk to your lender before you’re under contract, not after. The investors who treat their lender as a late-stage formality are the ones who lose earnest money when the appraisal comes back short.
— Daly Kay DiNatale
Capital Funding is built for exactly the scenario this guide walks through: a property that’s worth more after the work than it is today, and an investor who needs capital fast enough to actually win the deal. As a direct lender backed by a family office, Capital Funding closes hard money loans in days, not weeks, which matters when a seller is comparing your offer against a cash buyer’s.
Our fix-and-flip loan program funds purchase and rehab together, with draw schedules built around your renovation timeline instead of a generic template. If your project leans more toward a short-term acquisition play or a heavier construction scope, our hard money and bridge loan program covers that ground too, including deals other lenders won’t touch, from standard flips up through ultra-luxury properties over $10 million. Before you submit a loan request anywhere, run your numbers through a loan calculator to model how rate, points, and term length affect your actual holding costs. When you’re ready to move, start your application on our services page and get a real underwriting conversation going before your offer deadline hits.
For the formula itself and a working calculator, Wall Street Prep’s ARV breakdown is the clearest starting point. To verify a lender’s licensing before you sign anything, check NMLS Consumer Access, the primary registry for mortgage entities. BiggerPockets’ step-by-step ARV guide covers comp selection in more depth than most lender-facing content does.
LTV measures your loan against a property’s current, as-is value, while ARV measures the estimated value after renovations are complete. Rehab lenders often reference both, since LTV protects the lender against the property’s present condition and LTARV caps the loan against its future value.
ARV stands for after-repair value, the estimated market value of a property once planned renovations are finished, typically calculated using comparable sales plus expected renovation uplift.
Pull three to five recent, closely matched comparable sales, then add the value your specific rehab scope is expected to create, reconciling the two against each other before finalizing the number, as outlined in BiggerPockets’ ARV methodology.
The 70% rule sets your Maximum Allowable Offer by taking 70% of ARV and subtracting your estimated rehab cost, giving you a ceiling purchase price that preserves profit margin; it’s a heuristic lenders and investors use as a quick check, not a fixed underwriting law.
Yes, Capital Funding’s fix-and-flip and hard money programs reference after-repair value when sizing rehab loans, structuring draws around inspection milestones as renovation work is completed.
