Private Money Hawaii

ARV in Hawaii: How After-Repair Value Impacts Fix-and-Flip Loans

One of the most important numbers in any fix-and-flip deal is ARV, or After-Repair Value. It determines how much money you can borrow, how much you can invest in renovations, and ultimately, how profitable your flip will be.

But calculating ARV in Hawai‘i is very different from calculating ARV anywhere else in the country. The islands have unique micro-markets, unusual property types, rural pockets with fewer comps, and significant variation from neighborhood to neighborhood.

As a local Hawaii hard money lender, I evaluate ARV every day for investors across O‘ahu, Maui, Kaua‘i, and the Big Island. This guide will show you how ARV works, how it’s calculated, how it affects your loan amount, and why working with a local lender is critical for Hawaii flips.

What Is ARV? (After-Repair Value Explained)

ARV = The estimated market value of a property AFTER all renovations are complete.

This is not the current value.
It is the future value after the home is upgraded, repaired, and improved.

ARV determines:

• How much a lender will fund
• How much rehab budget you can borrow
• Whether the flip is profitable
• How much you may need for down payment
• Your exit strategy

A wrong ARV estimate can make the difference between a profitable flip and a money-losing one.

Why ARV Matters So Much in Hawai‘i

Hawaii is one of the most unique real estate markets in the world.

Here’s why ARV carries more weight here:

• High property prices amplify mistakes
  A small miscalculation can cost tens of thousands of dollars.
• Micro-markets vary block by block
  Price differences in Honolulu, Kahala, or Kailua can change drastically within just a few streets.
• Rural markets lack comparables
  Puna, Hilo, Ha‘ikū, and Waianae often require localized expertise.
• Older homes often need extensive renovation
  ARV must reflect realistic repair budgets.
• Unpermitted additions complicate value
  Many Hawaii homes have nonconforming structures that require judgment calls.
• Condos vary dramatically by building
  Values are heavily influenced by HOA stability, reserves, and amenities.

Because of these complexities, ARV accuracy determines whether your loan—and your flip—is viable.

How ARV Is Calculated in Hawai‘i

When I calculate ARV for a borrower, here are the factors I consider:

1. Comparable Sales (Comps)

This is the foundation of ARV.

Comps must be:

• Within 0.25–0.5 miles (ideally)
• Sold within the last 3–6 months
• Similar in square footage
• Same property type
• Similar upgrades and finishes
• Not forced sales or distressed situations

On O‘ahu, comps are easier to find.
On Maui, Kaua‘i, and the Big Island, comps often require a more nuanced approach.

2. Micro-Market Trends

Every neighborhood behaves differently.

For example:

• Kailua flips sell faster than Pearl City
• Waikiki condos vary dramatically by building
• Ewa Beach has a rapid new construction competition
• Puna and Ka‘u require lava zone adjustments
• Wailuku and Kihei have strong investor demand

A mainland lender often can’t tell the difference between these markets.

A local lender can.

3. Renovation Scope and Budget

You must provide a detailed renovation plan, including:

• Materials list
• Contractor bids
• Timeline
• Level of finish (mid-grade, luxury, etc.)
• Any structural or safety repairs

ARV depends heavily on the quality of upgrades, not just the fact that you’re upgrading.

4. Condition of the Property Pre-Renovation

Some homes require:

• Termite treatments
• Roof replacements
• Sewer/scoping repairs
• Electrical panel upgrades
• Plumbing updates
• Window replacements

These costs must be factored into the ARV and loan amount.

5. Hawaii-Specific Conditions

Local conditions matter:

• Lava Zones
  Properties in Zones 1–2 require adjusted ARVs.
• Unpermitted Additions
  Nonconforming structures may not add full value.
• Ocean Proximity
  Salt-air corrosion impacts long-term value.
• Hurricane Exposure
  Insurance availability influences value.

These Hawaii-specific factors make national ARV models unreliable.

How ARV Determines Your Loan Amount

Most fix-and-flip loans are structured around ARV using one of two methods:

Method 1: 70% of ARV Rule

Lenders typically fund up to 70% of the ARV.

Example:

• ARV: $900,000
• 70% of ARV: $630,000

Your total loan (purchase + rehab) cannot exceed $630,000.

Method 2: 85/100 Structure

Some structures allow:

• 85% of purchase price
• 100% of rehab funding
• Up to 70% of the ARV cap

This method allows more funding for experienced investors.