Loading...
Audit the potential ROI of a property renovation project. Model your "After Repair Value" (ARV) against rehab costs, holding fees, and selling commissions.
Step-by-step breakdown of the underlying equations.
Professional flippers often aim to pay no more than 70% of the ARV minus rehab costs. In this case, your maximum bid should be $195,000.
The Fix and Flip Profit Calculator evaluates the financial viability of residential real estate renovation investments. It models purchase price, rehabilitation budget, financing carrying costs, property taxes, insurance, and exit closing costs against the projected After Repair Value (ARV) to calculate true net profit and return on investment (ROI).
Worked Example:\nAn investor acquires a distressed property for $200,000, budgets $50,000 in renovations, and projects an ARV of $350,000 with a 6-month turnaround time:\n• Holding Costs (0.8%/month for hard money interest, taxes, and insurance): $200,000 × 0.008 × 6 = $9,600\n• Total Project Capital Invested: $200,000 + $50,000 + $9,600 = $259,600\n• Exit Brokerage & Closing Fees (8% of $350k ARV): $28,000\n• Net Profit: $350,000 − $259,600 − $28,000 = $62,400\n• Deal ROI: ($62,400 ÷ $259,600) × 100 = 24.0%.\n• 70% Rule Check: Max bid target = ($350,000 × 0.70) − $50,000 = $195,000 (Actual bid of $200k is very close to benchmark).
Target an ROI of at least 15% to 20% to build in adequate margin of safety against unexpected contractor overruns, permitting delays, or shifts in comparable local home sales. If your ROI is below 12%, an unforeseen roof repair or 60-day listing stall can erase your entire project profit.
The 70% rule states that an investor should pay no more than 70% of a home's After Repair Value (ARV) minus the estimated cost of repairs. The remaining 30% covers carrying costs, loan interest, realtor commissions, closing costs, and investor profit.
The most common unexpected expenses are structural/foundation defects, unpermitted prior work discovered during inspections, HVAC replacements, interest charges from contractor delays, and utility/HOA fees accrued while the home sits on the market.
Because house flips are held for short durations and treated as active inventory rather than passive rental holdings, profits are generally taxed as ordinary income rather than long-term capital gains, and are often subject to the 15.3% self-employment tax in the United States.
Experienced real estate renovators always add a 15% to 20% contingency line item to their contractor's base bid to absorb unforeseen repairs discovered after demolition begins.
Hard money lenders typically charge 10% to 14% annual interest plus 1 to 3 origination points. Every month a flip is delayed adds hundreds to thousands of dollars in interest expense directly out of your net profit.
Data verified: September 2026