January 12, 2026 | 2.5 Minute Read
Every profitable real estate deal starts—and ends—with two numbers: As-Is Value and After-Repair Value (ARV). If you don’t understand the difference between them, you’re not investing. You’re gambling.
These two values determine what you should pay, how much you can borrow, and whether a deal makes sense at all.
Before we dive in, I want to walk you through a real portfolio an investor was looking to acquire here in Birmingham—18 single-family homes. Through REI Brokers, I reviewed the deal, and on the surface, the numbers checked nearly every box our lenders require: minimum value of $100K per door, solid occupancy, acceptable locations, positive cash flow, and required minimum DSCR.
As always, the two numbers that matter most are the purchase price and the true value of the portfolio. Here’s how it was presented:
$1,294,000 – Purchase Price
$973,250 – Loan Amount (80%)
$2,055,800 – Value as determined by the buyer’s real estate agent
Based on the agent’s valuation, the LTV from purchase price to value comes in at 62%, and the loan-to-value is an even stronger 47%. Since most lenders won’t exceed 75% LTV of the determined value, this deal looks like a slam dunk at first glance.
But hold that thought—we’ll come back to this loan. First, let’s talk about how values are actually determined.
What Is As-Is Value?
As-Is Value is what a property is worth today, in its current condition, without making any improvements.
This value reflects:
The property’s present condition
Deferred maintenance or visible damage
Functional obsolescence (layout, systems, age)
How it compares to other properties selling without renovations
If the roof is shot, the kitchen is outdated, or the property won’t qualify for conventional financing, the as-is value accounts for all of that.
As-is value is what the market would realistically pay right now, not what you hope it will be worth later.
What Is After-Repair Value (ARV)?
After-Repair Value (ARV) is what the property is expected to be worth after renovations are completed.
This value is based on:
Renovated comparable sales (comps)
Market demand for updated properties
The quality and scope of your rehab
The finished product, not the current mess
ARV answers one question:
“If this property were fully renovated today, what would it sell for?”
Lenders, private money, and experienced investors all care deeply about this number—because it’s where profits and leverage are created.
Why the Spread Between As-Is and ARV Matters
The difference between as-is value and ARV is where opportunity lives.
That gap must cover:
Renovation costs
Holding costs
Financing costs
Transaction fees
Profit
If the spread isn’t wide enough, the deal doesn’t work—no matter how creative the financing is.
This is why investors don’t chase pretty houses.
They chase mispriced assets.
How Investors Use These Numbers
Let’s say a property has:
As-Is Value: $180,000
ARV: $280,000
Rehab Cost: $60,000
That leaves a $100,000 value increase created through renovation.
From there, an investor can:
Flip it for a profit
Rent it and refinance based on ARV
Pull out capital tax-free through a cash-out refinance
Increase equity without injecting new cash
This is the foundation of strategies like BRRRR and forced appreciation.
The Most Common Mistake Investors Make
New investors often anchor to ARV emotionally and ignore as-is reality.
They say things like:
“Once it’s fixed up, it’ll be worth X.”
“It’s just cosmetic.”
“I’ll do the work myself.”
But the market—and lenders—don’t care about intentions.
They care about current condition and comparable sales.
Overestimating ARV or underestimating rehab costs destroys deals fast.
And this is where the 18-property portfolio completely fell apart.
The real estate agent valued the portfolio at $2,055,800 ARV. The problem? None of the properties had been renovated, and every single one had significant deferred maintenance. When the appraiser spoke with the buyer’s agent, he made it clear: ARV was off the table. The appraisals had to be based on as-is value.
The as-is value of the entire portfolio came in at $1,337,000—a staggering $718,800 drop from the agent’s valuation.
Here’s how the revised numbers looked:
$1,294,000 – Purchase Price
$973,250 – Loan Amount (80%)
$1,337,000 – Appraised Value (As-Is)
At first glance, it still looks workable. The loan amount is 72% of the appraised value, which technically stays under the lender’s 75% LTV cap.
So… does the loan get approved?
No—and here’s why.
Two issues killed the deal:
Minimum value per door. The lender required at least $100,000 per property, and not a single home met that threshold on an as-is basis.
Deferred maintenance. The condition of the properties was the real deal-breaker. Every home required substantial repairs—so much so that it was surprising any of them were tenant-occupied at all.
This is the hard lesson investors learn the expensive way: ARV doesn’t matter if the lender is underwriting as-is.