What is After Repair Rent (ARR)?
After Repair Rent (ARR) is the estimated monthly rental income a property will generate once all planned renovations are complete. While ARV tells you what a property is worth if you sell it, ARR tells you what it earns if you rent it. For landlords, BRRRR investors, and anyone evaluating a property as a long-term hold, ARR is the foundational number that determines whether the deal makes financial sense.
ARR is calculated using rental comparables -- similar properties that are currently rented or recently leased in the same area. Just like sale comps for ARV, rental comps need to match the subject property in location, size, condition, and type. The more relevant your rental comps, the more accurate your ARR estimate.
How rental comps work
Rental comps follow the same logic as sale comps, but the data sources are different. Sale prices are recorded in county records and MLS databases. Rental rates come from active and recently leased listings on platforms like Zillow Rentals, Apartments.com, Rentometer, and MLS rental listings where available.
To find good rental comps, apply these criteria:
- Location: Within 0.5-1 mile of the subject. Rental rates can vary dramatically by neighborhood, school zone, and proximity to employment centers.
- Size: Match bedroom and bathroom count first, then square footage within 15-20%. A 3/2 property rents differently than a 4/2, even if the square footage is similar.
- Condition: Match the renovation level. A freshly renovated rental with stainless steel appliances and new flooring commands more rent than a functional but dated unit. Use comps that reflect what your property will look like post-renovation.
- Recency: Rental rates can shift seasonally and with market conditions. Use comps from the last 3-6 months. Rates from 12+ months ago may not reflect current market conditions.
- Property type: Compare single family to single family, duplex to duplex, condo to condo. Different property types attract different tenant pools and rent at different price points per square foot.
The cap rate connection
ARR feeds directly into the capitalization rate (cap rate), which is the most commonly used metric for evaluating rental property investments:
Cap Rate = (Annual Rent − Operating Expenses) ÷ Property Value
Or simplified: Cap Rate = Net Operating Income (NOI) ÷ Total Investment
If your ARR is $1,800/month, your annual gross rent is $21,600. Subtract operating expenses (taxes, insurance, maintenance, vacancy, management -- typically 35-45% of gross rent) and you get your NOI. Divide that by the total investment (purchase price + repairs) and you have your cap rate.
For example: $1,800/month rent, $21,600 annual gross, $13,000 NOI after expenses, $180,000 total investment = 7.2% cap rate. Most investors target a minimum cap rate of 6-8%, depending on the market and risk tolerance.
The point is that a small change in ARR has a large impact on cap rate. If your ARR estimate is off by $150/month, that's $1,800/year in NOI, which can swing the cap rate by a full percentage point. Getting ARR right matters.
When ARR matters most
Buy-and-hold investing
Landlords who buy properties to rent long-term care about one thing above all: monthly cash flow. They need the rent to cover the mortgage payment (principal + interest + taxes + insurance) with room left over. ARR is the number that determines whether a property cash flows or bleeds money every month. A property with a great ARV but weak ARR is a terrible rental investment.
BRRRR strategy
BRRRR (Buy, Rehab, Rent, Refinance, Repeat) investors need ARR to satisfy two requirements. First, the rent needs to cover the new mortgage payment after refinance with positive cash flow. Second, many lenders require a DSCR (Debt Service Coverage Ratio) of 1.2x or higher, meaning the rent must be at least 120% of the mortgage payment. ARR directly determines whether the refinance step works.
Wholesale disposition to landlords
If you're a wholesaler marketing a deal to rental buyers, ARR is what they want to see. Lead with the monthly rent, the cap rate, and the cash-on-cash return. A cash buyer who is a landlord evaluates your deal entirely through the lens of cash flow. Showing them ARV data is irrelevant if they never plan to sell. Show them the rental numbers.
The 1% rule as a quick screen
The 1% rule says that monthly rent should be at least 1% of the total investment (purchase price + repairs). A $150K all-in investment should rent for at least $1,500/month. This is a rough screen, not a precise analysis, but it's widely used to quickly filter deals. If a property doesn't come close to the 1% rule, most rental investors won't dig deeper into the numbers.
Common ARR mistakes
Using asking rents instead of actual rents
Listed rental prices are aspirational. Actual lease rates are often 3-8% lower due to negotiation, concessions, and vacancy pressure. When possible, use recently leased (signed lease) comps rather than active listings. If you only have active listings, discount your estimate by 5% as a conservative adjustment.
Ignoring seasonal variation
Rental demand peaks in summer and dips in winter in most markets. If your comps are from June but you're listing in January, you might be overestimating by 5-10%. Account for seasonality, especially in markets with strong seasonal patterns (college towns, vacation areas, northern climates).
Forgetting about expenses
ARR is gross rent, not profit. You still need to subtract property taxes, insurance, maintenance (budget 8-12% of gross rent), vacancy (5-8%), and property management fees (8-10% if you're not self-managing). A property that rents for $2,000/month might only net $1,100-$1,300 after all expenses.
Overestimating renovation impact on rent
Renovation increases rent, but not proportionally to cost. A $60,000 full renovation might increase rent by $300-$400/month. A $15,000 cosmetic refresh might increase rent by $150-$200/month. The cosmetic refresh often provides a better return on investment for rental properties than a full gut renovation.
How Deal Run handles rental analysis
Deal Run pulls rental comparables from MLS and public data alongside sale comps, so you can evaluate both ARV and ARR for every property in a single workflow. The comp analysis tool shows rental comps on the same map and grid as sale comps, with condition scoring and filtering built in. Use our rental cash flow calculator for quick estimates.
For a comparison of when to use ARV vs ARR, see ARV vs ARR: Which Matters for Your Exit Strategy.