How to Accurately Estimate ARV & Rehab Costs Before You Buy
- jfennimore
- 3 days ago
- 2 min read
A First Funding Guide for Smart Real Estate Investors
In today’s investment market, the difference between a profitable flip and a costly mistake often comes down to one thing:
Accurate numbers — before you close.
At First Funding, we work with investors every day who understand that success isn’t just about finding a deal. It’s about buying right — and buying right starts with accurately estimating:
✅ ARV (After-Repair Value)
✅ Total Rehab Costs
✅ Holding Costs
Here’s how to calculate each one with confidence before you buy.
1. Estimate ARV the Right Way
ARV (After-Repair Value) is what the property should sell for after renovations.
To estimate it accurately:
Use sold comps, not active listings
Stay within the same neighborhood
Compare similar size, beds/baths, and condition
Use sales from the last 3–6 months
Match your finish level to top comps
Be conservative. It’s better to underestimate ARV than overestimate it.
2. Break Down Rehab Costs Line-by-Line
Never guess a lump-sum number.
Account for:
Roof, HVAC, plumbing, electrical
Kitchen & bathrooms
Flooring, paint, windows
Permits, dumpsters, landscaping
A 10–20% contingency
Underestimating rehab is one of the fastest ways to lose profit.
3. Don’t Forget Holding Costs
These add up quickly:
Loan interest
Taxes & insurance
Utilities
HOA dues
Realtor commissions (5–6%)
Closing costs
Even a short delay can impact your margin.
4. Use a Conservative Formula
Here’s a conservative formula many experienced investors use:
Maximum Allowable Offer (MAO):
ARV × 70% – Rehab Costs = Maximum Purchase Price
The 70% rule helps account for:
Selling costs
Financing costs
Holding costs
Profit margin buffer
Markets vary, so adjust accordingly — but always build margin.
How First Funding Helps Investors Protect Their Margins
At First Funding, we don’t just provide capital — we help investors structure smart deals.
We help you:
Understand realistic loan terms and interest costs
Structure draws for rehab
Plan holding timelines
Move quickly so you don’t lose opportunities
Close fast with reliable funding
Because the truth is:
The best investors don’t guess. They calculate.
Final Thoughts: Buy with Data, Not Emotion
Real estate investing rewards discipline.
Before you buy any property:
Confirm ARV using solid comps
Build a detailed rehab budget
Calculate full holding costs
Leave margin for surprises
If the numbers don’t work on paper, they won’t work in reality.
Ready to Fund Your Next Smart Investment?
If you’re evaluating a deal and want a funding partner who understands investor math, First Funding is here to help.
Let’s make sure your next deal is built on strong numbers — not assumptions.
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