Cost Breakdown
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Plan Your Flip With Data, Not Guesswork
Enter your deal numbers, purchase price, rehab budget, ARV, financing terms, and instantly see profit, ROI, MAO, and cash needed. Adjust sensitivity sliders to stress-test ARV and rehab assumptions before you commit.
Our Calculation Method
This calculator uses standard fix-and-flip formulas with hard money financing assumptions:
- Loan Amount: Purchase price × (1 - down payment %)
- Points Fee: Loan amount × points %
- Interest (interest-only): Loan amount × APR × (months / 12)
- Total Holding: (Property tax + Insurance + Utilities) × months
- Selling Costs: ARV × (Agent % + Seller closing %) + Extra selling cost
- Buy Closing: Purchase price × Buy closing %
- Cash to Close: Down payment + Points + Buy closing + Rehab cost
- Total Costs: Purchase + Rehab + Holding + Selling + Interest + Points + Buy closing
- Profit: ARV - Total costs
- ROI: Profit / Cash invested
- MAO (Base 70% rule): 0.70 × ARV - Rehab
- MAO (Adjusted): 0.70 × ARV - Rehab - Holding - Selling costs (more conservative)
Assumptions
- Interest is calculated as interest-only on the purchase loan for the holding period (no principal paydown).
- Rehab costs are assumed to be paid in cash and are not financed. This reflects industry-standard practice where investors typically pay for renovations out of pocket or through separate lines of credit not included in the primary hard money loan.
- ARV is your estimated after-repair market value; validate with comps.
- All tax, insurance, and utility figures are monthly averages.
- Sensitivity sliders adjust ARV and rehab by ±20% to stress-test assumptions.
Methodology & Disclaimers
This tool is for educational purposes only and does not constitute financial or investment advice. MAO implementations vary; we provide both a basic 70% rule and an adjusted version that accounts for holding and selling frictions. Hard money terms differ by lender; actual rates, points, and draw schedules may vary. Property taxes, insurance, and utilities fluctuate by market and season. Always validate ARV with recent comps, obtain contractor bids, and consult licensed professionals before making offers.
Fix-and-Flip Calculator: ARV, MAO, Profit & ROI
Enter your deal basics (purchase price, rehab budget, ARV), financing terms (down payment, interest rate, points), monthly holding costs, and selling expenses. Instantly see projected profit, ROI, cash needed, and MAO calculated using both the basic 70% rule and an adjusted version that accounts for all deal friction.
Quick Start Tips
- Enter purchase price, rehab cost, and ARV. Validate ARV with recent sold comps in your market.
- Set down payment %, interest rate, points, and holding months. Rehab costs are calculated as cash paid out of pocket.
- Add monthly property tax, insurance, and utilities. Include agent commission, seller closing %, and buy-side closing %.
- Click Calculate to see profit, ROI, cash needed, MAO, and a full cost breakdown. Use sensitivity sliders to test ARV/rehab assumptions.
Complete Guide to House Flipping Success
House flipping can generate substantial profits when executed correctly, but it's also one of the riskiest real estate strategies. Unlike buy-and-hold rentals that generate monthly cash flow, flipping requires you to accurately predict ARV, control renovation costs, and sell quickly to minimize holding costs. This comprehensive guide breaks down the math, strategies, and common pitfalls that separate successful flippers from those who lose money.
Understanding the 70% Rule & MAO
The 70% rule is the industry-standard quick filter: your maximum allowable offer (MAO) should not exceed 70% of ARV minus rehab costs. This conservative approach leaves room for holding expenses, selling costs, financing fees, and profit margin.
70% Rule Formula Breakdown
Basic MAO Formula:
MAO = (0.70 × ARV) - Rehab Cost
Adjusted MAO Formula (More Conservative):
MAO = (0.70 × ARV) - Rehab - Holding Costs - Selling Costs
Example: Property with $300,000 ARV and $40,000 rehab needs
- Basic MAO = (0.70 × $300,000) - $40,000 = $170,000
- Adjusted MAO = $170,000 - $3,000 holding - $18,000 selling = $149,000
- The $21,000 difference accounts for all transaction friction
Why the 70% Rule Exists
The 70% rule isn't arbitrary - it's designed to ensure a minimum 15-20% profit margin after all expenses:
- Hard money interest & points: 10-12% APR plus 2-3 points equals 3-5% of purchase price
- Holding costs: Property taxes, insurance, utilities for 6-9 months = 2-4% of purchase price
- Selling costs: Agent commissions (6%), closing costs (2%), staging/repairs = 8-10% of ARV
- Profit margin: Minimum 15-20% return on cash invested to justify risk and effort
- Contingency buffer: 5-10% cushion for unexpected repairs, market shifts, or longer holding periods
Estimating ARV Accurately
ARV (After Repair Value) is the most critical number in your flip analysis. Get this wrong and everything falls apart. Here's how to estimate ARV like a professional:
The Comparable Sales Method
- Find 3-5 recent sales (within last 90 days) of similar homes in the same neighborhood
- Match key characteristics: Square footage (±10%), bedroom/bathroom count, lot size, condition, features
- Adjust for differences: Add/subtract for garage, pool, updates, larger lot (+$5K-$20K per feature)
- Calculate average price per square foot from your comps ($150-$300+ depending on market)
- Multiply by your property's square footage to establish baseline ARV
- Apply final adjustments for location (busy street -5%, cul-de-sac +5%, school district differences)
⚠️ Common ARV Mistake: Using asking prices instead of sold prices. Asking prices are often 5-10% higher than actual sales. Only use closed transactions from MLS, Zillow's sold listings, or county records.
Budgeting Rehab Costs
Underestimating rehab is the #1 reason flips fail. Budget conservatively and add 20% contingency for unknown issues:
Typical Rehab Costs by Scope
Light Cosmetic ($15-30/sq ft):
- Paint interior/exterior ($3,000-$8,000)
- New flooring (carpet or vinyl, $2,000-$6,000)
- Landscaping cleanup ($1,000-$3,000)
- Minor fixture updates ($1,000-$2,000)
- Deep clean ($500-$1,500)
Medium Renovation ($40-75/sq ft):
- Kitchen remodel - cabinets, counters, appliances ($15,000-$35,000)
- Bathroom updates - vanity, tile, fixtures ($8,000-$15,000 per bathroom)
- Flooring throughout - hardwood or tile ($8,000-$18,000)
- New HVAC system ($6,000-$12,000)
- Electrical/plumbing updates ($5,000-$10,000)
Heavy Renovation ($100-150+/sq ft):
- Complete gut to studs
- Foundation repairs ($10,000-$50,000)
- Structural work - beams, joists ($15,000-$40,000)
- New roof ($8,000-$25,000)
- Complete HVAC, electrical, plumbing replacement ($30,000-$60,000)
- Permits and inspections ($3,000-$10,000)
Hard Money Financing Explained
Most flippers use hard money loans because traditional mortgages require owner-occupancy and have slow approval processes. Here's what hard money actually costs:
Hard Money Cost Breakdown
Example: $250,000 Purchase, 6-Month Hold
- Loan amount: $200,000 (80% LTV is typical)
- Interest rate: 12% APR (interest-only payments)
- Points: 2 points = $4,000 (paid at closing)
- Monthly interest: $200,000 × 12% ÷ 12 = $2,000/month
- 6-month interest total: $12,000
- Total financing cost: $4,000 points + $12,000 interest = $16,000
💡 Strategy: Finish faster to save interest. Completing in 4 months instead of 6 saves $4,000 in interest ($2,000/month × 2 months). Speed is critical in flipping.
Hidden Costs Beginners Miss
Beyond purchase price, rehab, and hard money costs, these expenses destroy margins if not budgeted:
- Holding costs ($500-$1,500/month): Property taxes, insurance, utilities, HOA fees accumulate monthly. On a $300K property, budget $800/month minimum.
- Selling costs (8-10% of ARV): 5-6% agent commission, 2% buyer closing costs, 1-2% staging/repairs/cleaning before listing.
- Buying costs (2-4% of purchase): Closing costs, title insurance, inspections, appraisal fees.
- Carrying costs during listing: If property sits on market 60-90 days, that's 2-3 extra months of holding costs not budgeted in initial 6-month timeline.
- Unexpected repairs (plan 20% contingency): Hidden mold, termite damage, foundation issues, permit/code violations that surface mid-project.
- Capital gains taxes: Flips held less than 12 months are taxed as ordinary income (up to 37% federal + state), not long-term capital gains (15-20%).
Timeline: The Critical Factor in Flip Profitability
Every month you hold a property costs money. Here's a realistic timeline breakdown:
Typical Flip Timeline (Total: 6-9 Months)
- Weeks 1-3: Finding & analyzing deals - View 20-50 properties, run numbers on 5-10, make 1-3 offers
- Week 4: Inspection & due diligence - Inspector finds issues, renegotiate price or walk away
- Weeks 5-6: Closing process - Hard money approval, title search, paperwork, funding
- Weeks 7-8: Planning & permits - Finalize plans, pull permits, order materials
- Weeks 9-20: Construction (12 weeks) - Demo, rough-ins, finishes, delays for inspections
- Weeks 21-22: Final touches - Punch list, cleaning, staging, photography
- Weeks 23-26: Listing period - 4-8 weeks on market is typical (varies by market)
- Weeks 27-30: Closing - 30-45 days from accepted offer to closing
⚠️ Warning: First-time flippers typically take 9-12 months vs experienced flippers who complete in 4-6 months. Inexperience costs $10,000-$20,000 in extra holding costs and lost opportunity.
Common Flip Mistakes That Destroy Profits
- Over-improving for the neighborhood: Installing $50K in high-end finishes in a $250K neighborhood won't return value. Match the top 25% of recent sales, don't exceed them.
- Buying at retail prices: Flips only work when you buy below market. If you pay market price, there's no margin after renovation and selling costs.
- Using retail contractors: Retail rates ($80-$150/hour) destroy flip margins. Build relationships with contractor crews who work volume pricing ($40-$70/hour).
- Scope creep: Starting with cosmetic updates, then deciding to reconfigure the floor plan mid-project doubles costs and timeline.
- Ignoring permit requirements: Unpermitted work gets flagged in buyer's inspection, forcing you to retroactively permit or reduce price $10,000-$30,000.
- Falling in love with the property: Emotional decisions lead to overpaying, over-improving, or holding too long hoping for a better offer.
- Flipping in declining markets: If comps are trending down 2-5% over last 6 months, your ARV estimate is already outdated. Flip in stable or rising markets only.
Tax Implications of House Flipping
Flipping profits are taxed much more heavily than rental income or long-term capital gains:
How Flip Profits Are Taxed
- Ordinary income tax: Flips held under 12 months are taxed as ordinary income (22-37% federal bracket depending on total income)
- Self-employment tax: If you flip regularly, IRS may classify you as dealer, adding 15.3% self-employment tax on top of income tax
- State income tax: Additional 3-13% depending on state (California 9.3%, New York 6.85%, Texas 0%)
- Combined tax burden: Can reach 50-55% of profit in high-tax states like California or New York
Example: $60,000 flip profit in California:
- Federal tax (32% bracket): $19,200
- Self-employment tax (15.3%): $9,180
- California state tax (9.3%): $5,580
- Total taxes: $33,960 (57% of profit)
- After-tax profit: $26,040
Tax strategies: Form an LLC or S-Corp to reduce self-employment tax burden. Deduct all business expenses (mileage, home office, tools, education). Consider 1031 exchange into rental property to defer taxes if you're pivoting strategies.
When to Flip vs Hold as Rental
Sometimes the best flip is to not flip at all. Consider keeping as a rental when:
- Cash flow positive: If rent would cover PITI plus reserves, you build long-term wealth vs one-time profit
- Market softening: If comps are declining, waiting 1-2 years as rental lets market recover while generating cash flow
- Tax benefits: Depreciation and long-term capital gains (15-20%) beat ordinary income tax (22-37%)
- Refinance potential: After seasoning 6-12 months, refinance at 75-80% LTV, pull out invested capital, keep as rental
- Strong rental demand: Markets with sub-5% vacancy and 2-4% annual rent growth favor holding
Use our Long-Term Rental ROI Calculator to compare flip profit vs 5-year hold strategy before deciding.
Using This Calculator Effectively
Maximize your flip analysis by:
- Get 3 contractor bids: Use average bid for rehab input, not lowest (lowest usually has hidden costs or quality issues)
- Validate ARV with realtor: Ask local agent who specializes in your target neighborhood to review your ARV estimate
- Add 20% contingency to rehab: $40K estimated rehab should be input as $48K to account for unknowns
- Use worst-case holding period: If you expect 4-month flip, model 6-8 months to be conservative
- Test sensitivity sliders: Adjust ARV and rehab ±20% to see how deal performs if things go wrong
- Require 15%+ ROI: Below 15% return isn't worth the risk and effort. Target 20-30% for solid deals
- Factor in your time: If flip takes 200 hours of your time and nets $40K, that's $200/hour - ensure it's worth your opportunity cost
House flipping requires accurate ARV estimation, conservative rehab budgeting, fast execution, and rigorous financial discipline. Use this calculator to model realistic scenarios, stress-test assumptions, and only pursue deals with 20%+ margin of safety. The flippers who succeed treat it like a business with systems, not a get-rich-quick scheme.
For additional tools, check our Mortgage Calculator to understand financing costs or our Home Affordability Calculator to determine what you can afford if pivoting from flipping to primary residence purchase.
FAQ: Fix-and-Flip Calculator
What is the 70% rule?
The 70% rule states that a flipper should pay no more than 70% of ARV minus rehab. For example, if ARV is $300,000 and rehab is $40,000, MAO = (0.70 × $300,000) - $40,000 = $170,000.
How to compute MAO?
Basic MAO = 0.70 × ARV - Rehab. Adjusted MAO also subtracts holding and selling costs. Use adjusted MAO for a conservative offer.
What costs do flippers miss?
Holding costs (taxes, insurance, utilities), hard money interest & points, buyer/seller closing costs, rehab overruns, and opportunity cost if property sits.
How are rehab costs handled?
This calculator assumes rehab costs are paid in cash out of pocket, which reflects standard industry practice. The full rehab budget is included in your "Cash Needed to Close" calculation, but no interest is charged on rehab costs.
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. Obtain real quotes.
- Property taxes, insurance, utilities, and rehab budgets vary widely by market and property condition. Validate all inputs with local data and contractor bids.
- 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.