The estimated market value of a property once a planned renovation is finished, used to size fix-and-flip and other renovation loans.
ARV is investor shorthand. Appraisers and banks call the same idea the value as completed: what the property should be worth on the day the planned work is done. It is a forecast, built from recent sales of similar houses that are already in finished condition.
A lender uses it as one of two limits. It will lend up to a set share of ARV and up to a set share of total cost, and the smaller number wins. Here is an illustration with made-up terms. A house costs $200,000 and needs $60,000 of work, so total cost is $260,000. The borrower expects an ARV of $350,000. A lender that goes to 70% of ARV would allow $245,000. If it also caps the loan at 85% of cost, the limit is $221,000, and that is the loan.
The common mistake is treating your own ARV as the lender’s. The lender orders its own valuation, and federal appraisal standards for banks require the appraisal to analyze and report deductions and discounts for proposed renovation. If its number comes in below yours, the loan shrinks and your cash requirement grows. Support your figure with closed sales, not listings.
How it shows up in the data here
ARV is not in any public file used here. HMDA carries a property value on many loans, but it does not say whether that value was as-is or after repairs. To see who makes renovation and investor loans on small properties, use 1-4 unit investor lenders and the LTV and LTC calculator to test a loan against both value and cost.
Go further
- LTV and LTC calculator: Loan against value and loan against total cost.
- 1-4 unit investor lenders: Lenders with investor and business-purpose loans on 1-4 unit properties in HMDA.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- What to do after a bank says no to a business loan: One bank's no is one lender's answer, and the reasons are yours to ask for. They usually point to a constraint you can name.
Related terms
- Fix-and-flip loan: A short-term business-purpose loan to buy a house, renovate it and sell it, repaid from the sale instead of from monthly income.
- As-complete value: An appraiser's estimate of what a property will be worth on the date construction is expected to be finished.
- As-is value: The market value of a property in its actual physical condition, use and zoning on the appraisal's effective date, with no credit for planned work.
- Appraisal: A written, independent opinion of a property's market value as of a specific date, prepared by a qualified appraiser.
- Loan-to-value ratio (LTV): The loan amount divided by the value of the property securing it. A $700,000 loan on a property valued at $1,000,000 is 70 percent loan to value.
- Loan-to-cost ratio (LTC): The loan amount divided by the total cost of a project: the property plus all construction costs. It shows how much of the budget the lender funds.
- Hard money loan: A short-term real estate loan from a private or non-bank lender that is decided mainly on the property's value and the exit plan, not on the borrower's income.
Sources
- 12 CFR 34.44, Minimum appraisal standards, retrieved .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.