This guide walks you through the fix-and-flip calculator inputs, the 70% rule, MAO logic, and how to interpret profit, ROI, and cash needed for your flip.
What the Tool Does
The fix-and-flip calculator computes your projected net profit, return on investment (ROI), cash needed to close, and maximum allowable offer (MAO) using the 70% rule. It accounts for hard money financing (interest and points), monthly holding costs, and selling expenses to give you a realistic picture of your flip's economics.
Step-by-Step Inputs
- Deal Basics: Enter purchase price, estimated rehab cost, and after-repair value (ARV). Always validate ARV with at least 3 recent sold comps in your target market.
- Financing: Set down payment %, APR, points, and holding period in months. Check "Finance rehab draws" if your lender offers renovation financing (assumes 50% average utilization).
- Holding Costs: Input monthly property tax, insurance, and utilities. These add up quickly over a 6-month flip.
- Selling Costs: Enter agent commission % (typically 5-6%), seller closing %, and any extra fixed selling costs.
- Buy Closing: Add buy-side closing % (usually 1-2%).
- Calculate: Click Calculate to see profit, ROI, cash needed, MAO, and a detailed cost breakdown.
Example Scenario
Let's walk through a Phoenix flip:
- Purchase price: $250,000
- Rehab budget: $60,000
- ARV: $420,000
- Down payment: 20%, APR: 12%, Points: 2%, Hold: 6 months
- Monthly holding: $250 tax + $150 insurance + $100 utilities = $500/mo
- Agent commission: 6%, Seller closing: 2%, Buy closing: 1.5%
Results:
- Loan amount: $200,000
- Points fee: $4,000
- Interest: $12,000 (interest-only for 6 months)
- Total holding: $3,000
- Selling costs: $33,600 (6% + 2% on $420k)
- Buy closing: $3,750
- Cash to close: $57,750
- Total costs: $366,350
- Profit: $53,650
- Cash invested: $117,750 → ROI: 45.6%
- MAO (adjusted): $197,400
Understanding the 70% Rule & MAO
The 70% rule is a quick filter: your maximum allowable offer (MAO) should not exceed 70% of ARV minus rehab costs. This leaves room for holding costs, selling expenses, financing fees, and profit.
Basic MAO formula: MAO = 0.70 × ARV - Rehab
Adjusted MAO (more conservative): MAO = 0.70 × ARV - Rehab - Holding costs - Selling costs
The calculator shows both. Use the adjusted MAO when you want to account for all deal friction upfront. In our Phoenix example, the adjusted MAO is $197,400, meaning you should offer no more than that to maintain a healthy profit margin.
Interpreting Profit, ROI & Cash Needed
Projected Net Profit: ARV minus all costs (purchase, rehab, holding, interest, points, closing, selling). This is your bottom-line gain if everything goes as planned.
ROI on Cash: Profit divided by cash invested. In the example, $53,650 profit on $117,750 invested = 45.6% ROI. This is a strong flip return, especially for a 6-month hold.
Cash Needed to Close: Down payment + points + buy-side closing + rehab (if not financed). This is the cash you must bring to the table to acquire and renovate the property.
Using Sensitivity Sliders
The calculator includes two sensitivity sliders to stress-test your assumptions:
- ARV Variance: Adjust ARV by ±20% to see how profit and ROI change if comps come in lower or higher.
- Rehab Variance: Adjust rehab budget by ±20% to account for cost overruns or savings.
Example: If rehab runs 20% over budget ($72,000 instead of $60,000), your profit drops to $41,650 and ROI falls to 33.5%. Use these sliders to build a safety margin into your offers.
Common Mistakes Flippers Make
- Overestimating ARV: Always use recent sold comps, not list prices. ARV inflation kills deals.
- Underestimating rehab: Get 3 contractor bids and add a 10-15% contingency buffer.
- Ignoring holding costs: Property tax, insurance, utilities, and loan interest add up fast. Budget for longer holds.
- Forgetting selling costs: Agent commissions (5-6%) and seller closing costs (1-2%) are unavoidable. Factor them in from day one.
- Skipping financing math: Hard money interest and points can consume 5-10% of your profit. Model both interest-only and average draw scenarios.
FAQ
What is the 70% rule?
The 70% rule states that a flipper should pay no more than 70% of ARV minus rehab costs. For example, if ARV is $300,000 and rehab is $40,000, MAO = (0.70 × $300,000) - $40,000 = $170,000.
Should I finance rehab draws?
Financing rehab preserves cash but adds interest. If your hard money lender offers draws and you're cash-constrained, check the "Finance rehab" box to see how average utilization impacts total interest and cash needed.
What costs do flippers often miss?
Common missed costs: holding expenses (taxes, insurance, utilities over 6+ months), hard money interest and points, buyer and seller closing costs, rehab budget overruns, and opportunity cost if the property sits unsold.
How do I validate ARV?
Pull at least 3 recent sold comps within 0.5 miles and 6 months. Adjust for size, condition, and location differences. Use conservative comps to avoid overestimating ARV.
Methodology & Disclaimers
This fix-and-flip calculator is an educational tool only; it is not investment advice or a guarantee of profit. MAO implementations vary. We show both basic 70% rule and an adjusted MAO that subtracts typical holding and selling frictions. Hard-money terms differ by lender; interest-only and average draw utilization are simplifications. Property taxes, insurance, utilities, and rehab budgets vary widely by market and property condition. ARV estimates should be based on recent sold comps. Markets can shift; always reassess comps before closing. You are solely responsible for due diligence, financing, and legal compliance. Consult licensed real estate, legal, and financial professionals before purchasing investment property.