ARV in Fix & Flip Lending: What Lenders Actually Count

Published July 2026 · By the SLA Capital team

Every Fix & Flip loan is priced off two numbers: what the property will be worth after you fix it, and what it costs you to get there. The first number is ARV. Get it wrong on the way in, and you either lose the deal at underwriting or you close short on the rehab draw you needed.

ARV, defined

ARV = After-Repair Value. It's the appraised value of the property once the planned scope of work is complete. Not what a Zestimate says. Not what your wholesaler pitched. What a licensed appraiser will sign off on based on comparable sold properties in the same neighborhood, in the same 6–12 month window, at the same condition tier.

The appraiser starts with your scope-of-work (SOW) — the rehab budget line-by-line — and asks: "If this property looked like the comp on Maple Street when done, would it sell for the same price?" The answer becomes ARV.

Comps vs appraisal — where investors get burned

Investors run their own comps in the LOI stage, usually pulling three "sold in the last 90 days, within a half-mile, ±20% square footage." That's fine for the offer. It is not what the appraiser will do.

The appraiser will:

• Weight closed sales heavier than active listings. Your "list at $525K" comp is worth about 40% of a $505K closed comp.
• Adjust for condition. A comp that sold for $500K "cash, as-is, tarp on the roof" is not a $500K stabilized comp.
• Bracket. Your ARV needs at least one comp above your target and one below.
• Discount your ARV if the SOW is underscoped for the neighborhood. A quartz-vs-laminate mismatch to the $500K comps knocks the number.

The mistake we see most often: the LOI comes in based on average neighborhood price-per-square-foot with no adjustment for finish level. Then the appraisal comes back 8–12% low, the loan resizes, and the borrower has to cover the gap in cash — or walk.

How ARV determines your loan size — LTC vs LTV

Fix & Flip loans have two leverage tests, and your loan is the lesser of the two.

LTC — Loan-to-Cost. The loan divided by purchase + rehab. SLA Capital funds up to 100% LTC for premier repeat borrowers, with first-timers usually in the 85–90% range. This test decides how much cash-to-close you need.

LTV / ARV — Loan-to-Value against ARV. The loan divided by ARV. The industry cap is usually 65–75% of ARV. This test protects the lender from over-lending when the deal is thin.

Whichever number is smaller becomes your maximum loan. Miss ARV by 10%, and the LTV/ARV test binds; you have to bring more cash even if your LTC math worked.

The "70% ARV rule" — what it actually protects

The rough investor heuristic — total project cost shouldn't exceed 70% of ARV — isn't a bank underwriting rule. It's a profitability check. The 30% cushion covers:

• Holding costs (interest, insurance, taxes, utilities) — usually 3–6% of ARV
• Closing costs on the sale (agent commission, title, transfer tax) — usually 6–8% of ARV
• Rehab overruns — count on 10% over budget, always
• Actual profit — what's left

If your total project (purchase + rehab + carry) is above 75% of ARV, you're closing to break even. Above 80% and you're closing to lose money. The 70% rule is the profitability floor, not the loan sizing rule.

How draws work — and why the rehab budget matters

You don't get your rehab budget at close. It funds through draws: you complete a scope-of-work line, submit photos and invoices, an inspector confirms, and the money hits your account — usually same-day at SLA. This is why the SOW you submit at underwriting has to be accurate. A budget that misses a $12,000 HVAC line means you're floating that $12K yourself until the next draw.

Two rules for a clean draw file:

1. Line-item the budget. "Kitchen $28,000" won't fund. "Cabinets $9K, counters $5K, appliances $6K, plumbing $3K, electrical $2K, floor $3K" will.
2. Overscope, don't underscope. If in doubt, include the line. Unused rehab dollars come off the loan at payoff — but a line item you didn't include has to be added mid-project, which slows the draw.

How SLA Capital underwrites ARV

We order the appraisal through our vendor panel. We review the SOW line-by-line and flag any scope gaps before the appraiser sees the file — this is where our AI-enhanced underwriting shortens the timeline. Rates run 9.5–12%, up to 100% LTC for premier borrowers, with 100% of the rehab budget financed via draws. Loans from $55K to $3M, close in as little as 72 hours with clear title.