What is the 70% rule?

A screening formula: pay no more than 70% of the after-repair value minus your rehab budget. The remaining 30% covers financing, holding, selling costs and profit.

How do I estimate ARV accurately?

Use closed sales of similar size, age and condition within about half a mile in the last six months. Adjust for differences in bed and bath count, lot size and finish level.

What profit margin should I target?

Many flippers want a minimum of $25,000–$40,000 net or roughly 15–20% of ARV, scaled up for larger or riskier projects.

Why is hard money so expensive?

It is short-term, asset-based, funded quickly and on distressed collateral. Rates of 10–13% plus 1–3 points are normal, which is why hold time matters so much.

What costs do beginners usually forget?

Holding costs during the listing period, seller closing costs, utility bills during rehab, permit fees, and the interest accrued during the extra months that renovations run long.

Investment Analysis

Fix & Flip Profit Calculator

Net profit, ROI and the 70% rule maximum offer.

Inputs

Given

After repair value (ARV)

Purchase price

Rehab budget

Purchase closing costs

Hold period

months

Monthly holding costs

$/mo

Loan to cost

Loan rate

Points

Agent commission

Seller closing costs

Results

Computed

Estimated net profit

$58,150

79.5% return on $73,100 cash in, over 6 months

Maximum allowable offer (70% rule)$200,000

Your purchase price$200,000

Rehab budget$45,000

Financing points$3,920

Loan interest over hold$10,780

Holding costs$5,400

Agent commission$17,500

Seller closing costs$5,250

Total project cost$291,850

Cash out of pocket$73,100

Return on investment79.55%

Annualized return159.1%

Break-even sale price$287,807

Your purchase price is above the 70% rule maximum of $200,000. The margin for overruns or a soft market is thin.

$58,150 profit · 79.5% ROI

How this is calculated

A flip's profit is the sale price less every dollar spent acquiring, renovating, holding and selling the property:

profit = ARV − purchase − rehab − buying costs − financing − holding − selling costs

Financing on a flip is usually short-term hard money priced with both points and interest. Points are charged up front on the loan amount; interest accrues only for the months you hold:

points = loan × points% ÷ 100

interest = loan × rate ÷ 100 × months ÷ 12

The 70% rule is the industry's standard offer guardrail. It says never pay more than 70% of the after-repair value minus the rehab budget, leaving roughly 30% to absorb costs and profit:

max offer = ARV × 0.70 − rehab

Return on investment is measured against cash actually out of pocket, not the total project cost, since leverage means you fund only part of it. Annualizing that return lets you compare a fast four-month flip against a slower one:

annualized ROI = ROI × 12 ÷ hold months

The two assumptions that sink most flips are an optimistic ARV and an underestimated rehab. Base ARV on closed comparable sales from the last six months within a tight radius, not on active listings.

Worked example

The 70% rule on a tired bungalow

After-repair value (ARV) from comparable sales: $550,000. Renovation budget: $85,000.
Maximum allowable offer = 70% × 550,000 − 85,000 = $300,000.
You buy at $295,000. Holding 5 months at $2,400/mo costs $12,000; selling costs (commission, legal, staging) ≈ $33,000.
Total costs = 295,000 + 85,000 + 12,000 + 33,000 = $425,000.
Selling at ARV nets $550,000 − 425,000 = $125,000 gross profit — a healthy margin because the buy was disciplined.

Common mistakes

Trusting an optimistic ARV
The entire model hangs on the after-repair value. Use sold comparables from the last 90 days in the same neighbourhood — not active listings, not the best sale ever recorded.
Forgetting holding costs
Financing, taxes, insurance, utilities and snow removal run every month whether work happens or not. A 3-month schedule slip at $2,400/mo erases $7,200 of margin.
Budgeting the renovation to the dollar
Renovations of distressed homes uncover surprises — knob-and-tube wiring, foundation cracks, asbestos. Published renovation cost ranges are wide for a reason; carry 15% contingency.