How to use the house flipping calculator
The calculator has two tools. Deal analysis works out the profit on a specific deal. 70% rule gives a quick maximum offer from just two numbers.
On the Deal analysis tab:
- Purchase price and ARV. The after-repair value is what the finished home should sell for. Base it on recent sales of renovated, comparable homes nearby, not on list prices.
- Repair costs. The full renovation budget. Add a contingency of 10% or more for surprises behind the walls.
- Holding period and monthly holding costs. Count from purchase to the sale closing, including time on the market. Holding costs are property tax, insurance, utilities and upkeep.
- Financing. Hard-money lenders usually lend a share of purchase plus repairs (loan-to-cost) at an interest-only rate, plus points paid up front. Set loan-to-cost to 0 for a cash purchase.
- Closing and selling costs. Buying costs are a percent of the purchase price; selling costs, mostly agent commissions, are a percent of the ARV.
How the profit is calculated
Financing cost = Loan × Rate ÷ 12 × Months + Loan × Points
Total project cost = Purchase price + Closing costs + Repairs + Holding costs + Financing cost + Selling costs
Net profit = ARV − Total project costInterest is charged on the full loan for the whole holding period, as if the repair money were drawn at the start. Selling costs are a percent of the ARV.
Return on cash = Net profit ÷ Cash invested
Annualized return = (1 + Return on cash)12 ÷ Months − 1
Profit margin = Net profit ÷ ARVSelling costs are left out of the cash invested because they are paid from the sale proceeds at closing.
A worked example
An investor buys a house for $180,000 that should sell for $300,000 after $40,000 of repairs. A hard-money lender finances 85% of purchase plus repairs, a $187,000 loan at 12% with 2% points.
Over 6 months, the loan costs $11,220 in interest and $3,740 in points. Holding costs add $6,000, closing costs $3,600 and selling costs $24,000. The total project cost is $268,560.
Selling at $300,000 leaves a net profit of $31,440, a margin of 10.5% on the ARV. The investor put in $57,560 of cash, so the return on cash is 54.6%, or 139.1% annualized.
The profit disappears if the house sells for less than $265,826, 11.4% below the expected value.
Why the costs between purchase and sale matter
New flippers tend to focus on two numbers: what they pay and what they sell for. In the example, the ARV is $80,000 more than the purchase price plus repairs, which looks like a healthy profit. Yet closing, holding, financing and selling costs take $48,560 of it, more than the investor keeps.
Time is the cost that grows quietly. Each month adds holding costs and another month of interest:
| Holding period | Net profit | Return on cash | Annualized |
|---|---|---|---|
| 6 months | $31,440 | +54.6% | +139.1% |
| 9 months | $22,830 | +34.5% | +48.5% |
| 12 months | $14,220 | +19.0% | +19.0% |
Stretching the holding period from 6 months to 12 months cuts the profit from $31,440 to $14,220, and the annualized return falls even faster because the money is tied up longer. A repair overrun works the same way: $50,000 of repairs instead of $40,000 leaves $20,760.
The sale price is the biggest risk of all. In the example, an ARV 10% below the estimate leaves just $3,840; 10% above it, $59,040. The table under the calculator shows the steps in between.
Leverage: higher return, thinner cushion
A hard-money loan shrinks the cash you need, which lifts the return on that cash. Paid in cash, the same flip makes $46,400 on $229,600, a return of 20.2%. Financed, it makes less, $31,440, because of interest and points, but on far less cash, so the return on cash rises to 54.6%.
The catch is that leverage magnifies losses in the same way. With borrowed money, a lower sale price or a long delay eats into a small equity stake, and the lender is paid first. The financing cost also keeps running if the house sits unsold.
The 70% rule as a first screen
The 70% rule turns the analysis into one line: the maximum offer is 70% of the ARV minus repairs. The remaining 30% of the ARV, $90,000 in the example, has to pay for everything else and leave a profit.
| Rule percentage | Maximum offer |
|---|---|
| 65% | $155,000 |
| 70% | $170,000 |
| 75% | $185,000 |
The example deal at $180,000 is $10,000 above the 70% maximum, yet the full analysis still shows a profit. That is the right way to use the rule: it flags deals that need a closer look, but the detailed numbers decide. At $170,000, right at the maximum, the profit rises to $42,320.
The rule is a rule of thumb, and the right percentage varies by market. Where homes sell quickly and prices are high, buyers often stretch to 75% or 80%. Where sales are slow or holding costs are high, a lower figure gives more protection.
What this calculator does not include
- Taxes on the profit. In the US, flip profits are often taxed as ordinary income, and frequent flippers may owe self-employment tax.
- Your own time. The profit is before paying yourself for project management.
- Repair draws. Lenders often release repair money in stages, which lowers the interest a little; the calculator charges interest on the full loan from day one.
- Extra loan fees, such as draw inspections, prepayment terms or extension fees if the project runs late.
- Staging, marketing and seller concessions, unless you include them in the selling-cost percentage.