Fix & Flip Calculator

Guide: The 70% rule for flips walks through the convention behind the max-offer line — how the percentage is applied, what the margin has to cover, and how to re-run a deal at a different rule. The guides index covers the rest of the site's models.

The worked example, line by line

A house entered with an after-repair value of $400,000, a rehab budget of $50,000, a purchase price of $230,000, $10,000 of holding costs, selling costs of 6% of ARV, and the 70% rule. The max-offer line is 70% × $400,000 − $50,000 = $230,000, which is exactly the purchase price entered, so this example sits right on the rule. The profit line ignores the rule and works from the actual costs: selling costs are 6% of $400,000, or $24,000; total invested adds purchase, rehab, holding, and selling costs to $314,000; projected profit is ARV minus that total, $86,000; and return on cost is profit divided by total invested, 27.4%. Every figure is computed by the same tested engine as the calculator above, so the copy cannot disagree with the tool.

The formula chain

The calculator reports 5 lines, and they come from two independent chains. The first chain produces the max offer and uses only the rule percentage, the after-repair value, and the rehab budget:

Max offer = rule% × after-repair value − rehab budget. The purchase price, holding costs, and selling costs play no part in it.

The second chain produces everything else and never looks at the rule percentage:

Selling costs = after-repair value × selling cost %. Note the base: the ARV, because that is the price the property sells at — not the purchase price.
Total invested = purchase price + rehab budget + holding costs + selling costs. The engine counts selling costs in the total even though they are paid out of the sale rather than up front; that convention is what keeps the next two lines consistent with each other.
Projected profit = after-repair value − total invested.
Return on cost = projected profit ÷ total invested, expressed as a percentage. It carries no time dimension.

Keeping the two chains apart is the key to reading this tool. The max offer answers "what does the convention say I could pay?"; the profit line answers "what is left at the price I actually entered?". They agree only when the purchase price equals the max offer, as it does in the headline example.

What each input does to the result

After-repair value is the only input that appears in both chains, which is why it moves everything. Lower the headline ARV from $400,000 to $370,000 and leave every other input alone: the max offer falls to $209,000 — now below the $230,000 purchase price — selling costs shrink to $22,200 because they are a percentage of ARV, and projected profit drops from $86,000 to $57,800 — 18.5% return on cost. A $30,000 change in one estimate moved the profit by $28,200, with the selling-cost line absorbing the small difference.

Rehab budget subtracts dollar for dollar from both the max offer and the profit. Raise the headline rehab budget from $50,000 to $65,000 and leave every other input alone: the max offer falls from $230,000 to $215,000 and the projected profit from $86,000 to $71,000 — the same $15,000 off each line, with the return on cost at 21.6%. Two projects at the 70% rule show how the scale of the work shapes the numbers. A lighter project — $180,000 ARV, $12,000 rehab, $110,000 purchase, $4,000 holding, 6% selling — yields a $114,000 max offer, $136,800 total invested, and a $43,200 projected profit at 31.6% return on cost. A heavier one — $520,000 ARV, $140,000 rehab, $220,000 purchase, $22,000 holding, 6% selling — yields a $224,000 max offer, $413,200 total invested, and $106,800 of projected profit at 25.8%. The larger dollar profit comes with far more capital in the total, which is what the return-on-cost line is there to show.

Purchase price affects only the profit chain, and it does so one dollar at a time. Run the headline deal at three prices: $200,000, below the max offer, gives $116,000 of projected profit and 40.8% on cost; $230,000, at the max offer, gives $86,000 and 27.4%; $260,000, above it, gives $56,000 and 16.3%. The max-offer line reads $230,000 in all three runs because nothing it depends on changed.

Holding costs are a project total you compute yourself — the model has no month count. Raise the headline holding costs from $10,000 to $25,000 and the projected profit falls by exactly the $15,000 difference, to $71,000, while the return on cost slips to 21.6% because the lower profit is now divided by a larger total.

Selling costs are entered as a percentage and applied to the ARV. On the headline example, 6% is $24,000 and 7% is $28,000; each point of selling cost on a $400,000 ARV is $4,000 of profit, and the projected profit moves from $86,000 to $82,000.

Rule percentage moves the max offer and nothing else. The same headline inputs at a 65% rule give a max offer of $210,000; at 75% they give $250,000; and the projected profit is $86,000 in both cases, because the profit chain reads the purchase price you entered, not the rule. Leave the field blank and the engine applies 70% — the build checks that the blank-field result matches the explicit 70% result.

The max offer is a screen, not a verdict

The rule's margin — the share of ARV the convention does not let you pay — is not profit. It is the pool from which holding costs, selling costs, financing, and surprises are paid, and profit is whatever remains. That is why the profit chain exists separately: it replaces the convention's single percentage with the costs you actually expect — purchase, rehab, holding, and selling. Buying at exactly the max offer makes the relationship explicit: the projected profit is then the margin minus holding and selling costs, and nothing else. On the headline example the margin is $400,000 − ($230,000 + $50,000) = $120,000, and $120,000 − $10,000 − $24,000 = $86,000, the profit line. Two consequences follow. Paying above the max offer does not by itself produce a loss — the $260,000 run above still shows $56,000 of projected profit, thinner than the $86,000 at the rule price — though pay far enough above it and the profit line does go negative: a project entered with a $300,000 ARV, $80,000 rehab, $210,000 purchase, $15,000 holding, and 6% selling costs has a max offer of $130,000, a total invested of $323,000, and a projected profit of -$23,000, at -7.1% on cost. And paying at the max offer does not guarantee a profit: a project entered with a $220,000 ARV, $45,000 rehab, and 6% selling costs at the 70% rule has a max offer of $109,000 and a margin of $66,000; enter that max offer as the purchase price together with holding costs of $60,000 — a figure chosen so that, with the $13,200 of selling costs, the two exceed the margin — and the result is $227,200 invested and a projected profit of -$7,200, negative, at -3.2% on cost. The engine performs no comparison between the max-offer line and the price you entered: the result box shows them as separate lines, and reading one against the other is a step you take yourself. The 70% rule guide covers the convention in depth.

What the optional fields change

Holding costs and selling costs are optional inputs, and the gap between a run without them and a run with them is the clearest picture of what the rule's margin has to cover. A project entered with a $250,000 ARV, $30,000 rehab, and $150,000 purchase at the 70% rule, with holding costs and selling costs both set to zero, shows a max offer of $145,000, total invested of $180,000, and projected profit of $70,000 at 38.9% on cost. Add $8,000 of holding costs and 6% selling costs ($15,000) and the same project shows $203,000 invested and $47,000 of projected profit at 23.2%. The max offer did not move; the $23,000 difference is entirely the two optional lines. The form fills in 6% selling costs when that field is blank; it fills in nothing for holding costs, so a blank holding field means zero.

Where the model stops

This is a screening model, and its edges are part of the answer. It has no timeline: holding costs are a total, not a monthly rate times a month count, so a longer hold changes nothing unless you raise the input. It has no loan: there is no interest rate, term, or lender fee field, and any financing cost belongs inside holding costs as a figure you compute. It applies no contingency to the rehab budget — the Rehab Budget Calculator builds that figure from your own line items with a contingency you set, and its grand total is the number to carry into the rehab field here. It treats the ARV as fixed between purchase and sale — market movement during the project is not modeled, and neither is the time it takes to find a buyer. It does not compute income taxes on the profit. And it has no field for purchase-side closing costs or for the value of your own labor: whatever you want counted has to be entered in one of the cost inputs. None of these omissions is a hidden adjustment. Each one is simply absent, which is why the numbers are a shape to reason about rather than a forecast.

How to read the output

The result box leads with the projected profit, followed by the max offer (labeled with the rule percentage used), the return on cost, the total invested, and the selling costs. Read the first two against each other: when the purchase price is at or below the max offer, the deal is inside the convention; when it is above, the profit line shows how much of the margin the price consumed. A negative projected profit means the costs as entered exceed the ARV as entered — a statement about the inputs, not a judgment on the project, since every one of those inputs is an estimate you supplied. Return on cost is a ratio with no time dimension; two projects with identical inputs show identical percentages whether one takes three months and the other a year, so it does not compare across durations and is not an annual return. The copy button captures the headline profit, the return, and the max offer in one line.

Common misreadings

"The margin is my profit." The share of ARV the rule holds back is the budget for holding costs, selling costs, financing, and surprises; profit is what remains after the profit chain subtracts the actual figures.
"A higher rule percentage means a bigger profit." It means a higher max offer. Profit is computed from the purchase price you entered and does not change with the rule.
"Selling costs are a percentage of what I paid." They are a percentage of the ARV, the price the property sells at.
"Holding costs are monthly." The field takes the project total. Enter a monthly figure and the model treats it as the whole project's cost.
"Return on cost is my annual return." It is profit over total invested with no duration attached, and it is not a cash-on-cash return either — the model does not know how much of the total was borrowed.
"The rehab budget includes a reserve." Only if you put one in. The flip model adds nothing to the figure you enter.

Where the estimates bite

The rehab budget, the holding costs, and the ARV are estimates made before the project starts, and the examples above show that each one reaches the profit line directly. A rehab overrun lowers the profit by the overrun; extra months of holding lower it by the extra cost; a lower ARV lowers it by the shortfall, less the small saving in selling costs. The model does not flag estimate risk, and it does not know which of your inputs is firm and which is a guess. Re-running a deal at a lower ARV, a higher rehab figure, and a longer hold — as the examples do — is how the calculator is meant to be used: not to find the one number, but to see how far the profit line travels when an estimate moves.

What the engine refuses

Inputs outside the engine's limits return a message instead of a number, and the form shows the same message. Asking for a 120% rule returns the message "Enter a rule percentage of 100% or less." A negative rehab budget returns "The rehab budget cannot be negative." The ARV and purchase price must be greater than zero, every percentage field has an upper bound the engine states in its message (quoted above), and every money field has an upper limit the engine states in words when it is crossed.

Frequently asked questions

What is the 70% rule?

A screening convention, not a verdict: the maximum offer equals 70% of the after-repair value minus the rehab budget. The margin the rule holds back is not profit — it has to absorb holding costs, selling costs, financing, and surprises, with profit in whatever remains. The percentage is a field on this calculator, so you can test the same deal at any rule you choose; the projected-profit line never uses the rule at all.

What is ARV and how do I estimate it?

After-repair value: the price the property is expected to sell for once the work is done, estimated from recent sales of comparable homes that are already renovated — similar size, layout, and condition. The calculator cannot check an ARV; it only propagates it. Because the ARV appears in the max offer, the selling costs, and the projected profit, an optimistic ARV inflates every output at once, which is why the examples on this page re-run the same deal at a lower ARV.

What goes into holding costs?

Everything the project costs you while you own it, totaled across the months you expect to hold: loan interest and any lender fees, property tax, insurance, utilities, and upkeep such as lawn care or security. Enter the project total, not a monthly figure — the model has no month count and does not multiply. Every dollar of holding cost reduces the projected profit by a dollar, so a longer-than-planned hold shows up only if you raise this input yourself.

Why do selling costs default to 6%?

The form fills in 6% of ARV when the field is left blank as a planning placeholder, not a market figure; your actual commissions, seller-paid closing items, and concessions may be higher or lower, and the field accepts whatever you expect. The percentage is applied to the ARV, not the purchase price: on the $400,000 example, 6% is $24,000 and 7% is $28,000, a $4,000 difference that comes straight out of the projected profit.

What does “return on cost” mean, and is it annualized?

Projected profit divided by total invested, where total invested is the purchase price plus rehab, holding, and selling costs. It is not annualized: the model has no duration input, so a project that takes three months and one that takes a year with the same inputs show the same percentage. It is also not a cash-on-cash return — the model does not know how much of the total was borrowed.

Does the calculator model financing or taxes?

No. There is no loan in the model: if the project is financed, the interest and fees you expect to pay belong inside holding costs, as a total you compute yourself. Income taxes on the profit are not modeled, and neither is any market movement between purchase and sale — the ARV is treated as fixed at whatever you entered. The methodology page lists every omission.

How does the rehab budget here relate to the Rehab Budget Calculator?

This page takes the rehab budget as one number and applies no contingency to it. The Rehab Budget Calculator totals your own line items — materials and labor per line — and adds a contingency percentage you set; its grand total is the figure to carry into the rehab field here if you want the contingency included in the flip analysis.

Not financial advice: a general educational estimate. It excludes financing structure, income taxes on the profit, and market movement during the project — verify every deal with local comparables and qualified professionals. Values are processed locally in your browser and never transmitted. See the methodology page.

Flip analysis