Mastering the After Repair Value

In the Bay Area, a bad After Repair Value (ARV) calculation doesn't just cut into your margins—it can completely wipe out your capital.

Because our market is highly localized, running comps here requires more precision than in secondary markets. Here is how top investors calculate ARV accurately.

■ Hyper-Local Comparables

In San Jose or Oakland, crossing a major arterial road or getting placed in a different school district can swing a property's value by 15%. When pulling comps, limit your radius to 0.25 miles and never cross major highways or distinct neighborhood boundaries. Only look at properties that have sold in the last 90 days.

■ Compare Apples to Apples

Ensure your comps match the subject property in style, era, and utility. A fully renovated 1920s craftsman has a completely different buyer pool and price per square foot than a modernized 1970s ranch home, even if they have the exact same bed/bath count and square footage.

■ The 70% Rule Adjusted for the Bay

Nationally, flippers use the 70% rule: Maximum Allowable Offer = (ARV x 70%) - Repairs. However, because Bay Area price points are so high, sticking rigidly to 70% will lose you every deal. Many local investors adjust this to the 75% or even 80% rule, as a 20% margin on a $1.2M flip still yields massive raw profit compared to a 30% margin on a $200k midwest home.

Pro Tip

Always verify your ARV with a local broker who regularly lists renovated properties in that specific zip code before locking up your hard money loan.