When you apply for a hard money loan—especially for a fix-and-flip or BRRRR project—one number can make or break your deal: ARV (After Repair Value).
ARV isn’t just a guess at what your property will be worth after renovations. It’s the cornerstone of how a private lender decides:
- How much they’ll lend
- What your interest rate will be
- Whether the deal is even fundable
The better you understand how lenders calculate ARV—and how to influence it—the more control you’ll have over your financing, your terms, and ultimately, your profit.
What Is ARV in Hard Money Lending?
ARV = Current Property Value + Renovation Value Increase
It’s an estimate of what the property will sell for once all planned improvements are complete and the property is in market-ready condition.
For a hard money loan, the ARV matters because most private lenders (including Lending Bee) use it to determine the maximum loan-to-value (LTV) or loan-to-cost (LTC) ratio they can offer.
Example:
If a lender’s max is 70% of ARV and your ARV is $500,000, your max loan amount will be $350,000—regardless of your purchase price.
How Private Lenders Evaluate ARV
While each lender has their own process, most use a combination of these methods:
1. Comparable Sales Analysis (Comps)
Lenders compare your property to similar, recently sold properties in the same neighborhood:
- Within 0.5–1 mile radius (urban) or 3–5 miles (rural/suburban)
- Sold within the last 3–6 months
- Similar square footage, bed/bath count, and lot size
Pro Tip: If your planned upgrades will move your property into a higher comp category (e.g., from 2-bed to 3-bed), make sure the lender knows.
2. Scope of Work Review
Your renovation plan is critical. Lenders look for:
- Detailed breakdown of materials, finishes, and systems
- Clear timelines and contractor bids
- Evidence that the upgrades align with the comps you’re targeting
If you plan to spend $50,000 on cosmetic updates, the lender will compare your ARV to other homes with similar finishes—not to fully gutted remodels.
3. Market Condition Adjustments
Private lenders factor in:
- Seasonal trends (slower winters, hot spring markets)
- Local demand and inventory
- Interest rate environment
If market data suggests prices will soften in your timeline, they may adjust ARV conservatively.
4. Property Inspection or BPO
Many lenders use:
- Broker Price Opinion (BPO) reports
- Drive-by appraisals
- In-house valuations
Unlike full appraisals, these are faster and cheaper—but they still provide a professional assessment of the property’s post-renovation value.
5. Experience Factor
If you’re a first-time flipper, the lender may be more conservative with ARV projections until you prove your ability to execute a rehab profitably.
How ARV Impacts Loan Terms
The higher and more credible your ARV, the better your financing options.
Here’s why:
- Loan Amount – Higher ARV = larger possible loan at the same LTV
- Leverage – More funding for purchase + rehab, less cash out of pocket
- Rate & Fees – Lower perceived risk can mean better pricing
Example:
Two investors present the same property. One provides detailed comps, a licensed contractor bid, and before/after renderings. The other provides only a handwritten budget. The first investor’s credible ARV supports a higher loan and potentially lower costs.
How to Influence (and Improve) Your ARV
1. Provide Strong Comps Yourself
Don’t rely solely on the lender’s data.
- Use MLS access or work with a savvy agent
- Match renovation quality to the comps you choose
- Eliminate outliers that could drag your value down
2. Submit a Professional Scope of Work
Include:
- Line-item budget
- Materials list with brand/finish examples
- “Before” photos and design mockups for “After”
A clear scope helps the lender visualize the finished product—and believe in your ARV.
3. Show Your Contractor’s Track Record
If your contractor has completed similar projects in the area, share those addresses, sale prices, and timelines.
4. Explain Any Unique Value Drivers
Are you adding a bedroom? Converting a garage? Opening up the floor plan? These can significantly increase value—but only if the lender understands their impact.
5. Demonstrate Your Experience
If you’ve completed previous profitable flips or BRRRR projects, provide before/after photos, budgets, and final sale prices. This builds credibility.
Common ARV Mistakes That Hurt Your Loan
- Using aspirational comps – Picking sales from better neighborhoods or with superior upgrades.
- Underestimating rehab time – A 3-month project becoming 6 months can change market conditions.
- Overbuilding for the area – Adding luxury finishes in a mid-tier neighborhood doesn’t guarantee higher ARV.
- Ignoring appraisal standards – Comps too far away or too old may be rejected.
Why ARV Is More Than Just a Number
A realistic, well-supported ARV doesn’t just help you secure financing—it protects you from overpaying for a property and overleveraging your capital.
At Lending Bee, we view ARV as a collaborative process. We work with borrowers to ensure our projections are achievable, based on real data, and aligned with your exit strategy.
In the world of ARV hard money loans, your success depends on two things:
- Knowing how private lenders calculate ARV
- Presenting your deal so that your ARV is both credible and compelling
The better you do that, the more leverage, speed, and profit you can unlock.
Want to See What Your Property’s ARV Could Be?
Send us the address, your rehab plan, and photos—we’ll give you a no-obligation ARV estimate and funding terms within 24 hours.