House Flipping Calculator

Analyze the profitability of a house flip. Calculate total investment, expected profit, ROI, and check if the deal passes the 70% rule.

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Enter the property details and costs to analyze the profitability of your house flip.

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Pro Tip

Always add a 15-20% contingency to your rehab budget. Unexpected issues like water damage, outdated wiring, or foundation problems can quickly erode your profit margin.

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House Flipping Economics

House flipping involves purchasing a property below market value, renovating it to increase its value, and selling it for a profit. Success requires accurate estimation of three key variables: purchase price, renovation costs, and after-repair value (ARV).

The 70% rule is the most widely used guideline in house flipping. It states that your maximum purchase price should be 70% of the ARV minus renovation costs. This 30% margin accounts for selling costs, holding costs, and profit. While not every deal fits this rule perfectly, it provides a quick screening tool.

Holding costs are often underestimated by new flippers. Every month you hold the property costs money in loan payments, insurance, taxes, and utilities. A flip that takes 6 months instead of 3 can see holding costs double, significantly impacting profitability.

Speed of execution is critical. The longer a flip takes, the more holding costs accumulate and the greater the risk of market changes. Experienced flippers streamline their renovation process and have reliable contractor relationships to minimize project timelines.

Flip Profitability Formulas

The 70% Rule

Max Purchase = ARV × 70% - Rehab Costs

Where:

ARV = After-Repair Value (expected sale price)

Rehab Costs = Total renovation/repair budget

70% = Target margin for costs and profit

Example

Evaluating a flip: ARV = $350,000, Rehab = $50,000:

  • • Max purchase: $350,000 x 0.70 - $50,000 = $195,000
  • • If purchase price is $200,000: FAILS 70% rule by $5,000
  • • Total investment: $200,000 + $50,000 + $15,000 holding = $265,000
  • • Selling costs: $19,250 commission + $10,500 closing = $29,750
  • • Profit: $350,000 - $265,000 - $29,750 = $55,250 (ROI: 20.8%)

Frequently Asked Questions

What is the 70% rule in house flipping?
The 70% rule states that you should pay no more than 70% of the after-repair value (ARV) minus repair costs for a flip property. For example, if ARV is $350,000 and repairs cost $50,000, max purchase price = ($350,000 x 70%) - $50,000 = $195,000. This ensures sufficient profit margin.
What holding costs should I include?
Holding costs include mortgage/hard money payments, property taxes, insurance, utilities, HOA fees, lawn care, and any loan interest. These costs accrue every month you own the property before selling, making speed critical to profitability.
What is a good ROI for a house flip?
Most experienced flippers target a minimum ROI of 15-20% and a profit of at least $25,000-$50,000 per flip. The exact target depends on the market, project size, and the level of risk involved. Higher-risk projects should demand higher returns.
How accurate are rehab cost estimates?
Add a 10-20% contingency buffer to your rehab budget for unexpected issues. Common surprises include hidden water damage, outdated electrical/plumbing, foundation issues, and permit-required work that was not initially apparent.
What are the tax implications of flipping houses?
Profits from house flipping are typically taxed as ordinary income (not capital gains) since the IRS considers this a business activity. Self-employment tax may also apply. If you flip more than one house per year, you may be classified as a dealer, which has additional tax implications.