ARV is the number the entire BRRRR strategy revolves around. You buy a distressed property, rehab it, refinance at the ARV, and ideally pull out most or all of your original capital. The whole plan lives or dies on whether your ARV estimate is accurate. Investors who overestimate ARV end up with deals that look great on paper and fail at refinance because the appraiser comes in low. The safe way to estimate ARV is to pull three to five comparable sales within half a mile, all closed in the last six months, all in similar post renovation condition, and average them. Then subtract 5 to 10% for conservatism. Never use Zillow estimates. Never use pre renovation comps. Never trust the wholesaler's ARV number. The lender's appraiser is the only ARV that actually matters, so your job is to underwrite the deal as if the appraiser is going to be conservative.
Example
Three recently renovated 3 bed, 2 bath homes within half a mile sold for $185,000, $192,000, and $178,000 in the last 6 months. Average is $185,000. Conservative ARV is $175,000.