Question about house flipping and the houses value

[Peter Fuentes]

If im buying a house for $5 dollars and adding $2 dollars of repairs... The house is now able to sell for $10?

Is the value of the actual material added and the ARV correlated?

It took us $100,000 to build this house...but we are selling it for $150,000.

Is that how Real Estate works?  Am I missing something?

[Jonathan Greene]

The ARV is not a product of how much you put in, it's a product of how much you can sell it for which is directly associated to sold comps in the nearby area that match the home you are selling. If the materials and flip budget were a part of the real ARV, people could overspend and recoup, but it doesn't work like that. Your purchase price and ARV are not related, only in terms of how much profit you will make. Your ARV is an after repair value, but is the market value for a flip.