How to Analyze a House Flip Deal
Successful house flipping starts with accurate deal analysis. This calculator helps you evaluate potential flips by accounting for all costs: purchase price, renovation budget, holding costs during the project, and selling expenses including agent commissions and closing costs.
Enter the purchase price, your renovation budget, the estimated After Repair Value (ARV), and the expected holding period. The calculator shows your projected profit, ROI, annualized return, and whether the deal passes the 70% rule that experienced flippers use as a benchmark.
The 70% Rule Explained
The 70% rule is the most widely used screening tool in house flipping. It sets a maximum purchase price to ensure adequate profit margin. The formula is: Maximum Offer = ARV x 70% - Estimated Repairs. This 30% margin covers your profit, closing costs on both ends, holding costs, and unexpected expenses.
While the 70% rule is a useful starting point, experienced investors may adjust it. In competitive markets, investors sometimes work with 75-80% of ARV, accepting thinner margins. In risky markets or with extensive renovations, more conservative investors use 65% to build in extra cushion for the unexpected.
Common Flip Pitfalls to Avoid
The most costly mistake is underestimating renovation costs. Always get multiple contractor bids before making an offer, and add a 10-20% contingency for unexpected issues like hidden water damage, electrical problems, or structural concerns. Properties that look like simple cosmetic flips often reveal deeper problems once work begins.
Overestimating the ARV is the second most common error. Use conservative comparable sales from the past 3-6 months in the immediate neighborhood. Do not assume the highest sold price, as your renovated home may not command top dollar in every market condition. Account for seasonal variations in your local market.