Ultimate Guide to House Flipping Math

How to Calculate House Flip Profit & ROI

The exact formulas seasoned investors use to underwrite a fix-and-flip in under five minutes — the 70% rule, Maximum Allowable Offer (MAO), holding costs, and cash-on-cash ROI.

The Four Numbers Every Flip Comes Down To

  • ARV — After Repair Value. What the rehabbed house will sell for.
  • Purchase Price — What you pay the seller at closing.
  • Repair Cost — Total scope-of-work budget, materials + labor.
  • Carry Costs — Lender fees, holding costs, and selling costs.

Get these four right and the math takes care of itself.

The 70% Rule (And Why Pros Still Use It)

The 70% rule is the fastest sanity check in flipping. It bakes in profit margin and a buffer for the costs you can’t see yet.

MAO = (ARV × 0.70) − Repair Cost

Example: A house will be worth $300,000 after rehab and needs $45,000 in repairs.

MAO = ($300,000 × 0.70) − $45,000 = $165,000

Pay more than $165,000 and you’re eating into the 30% spread that pays for lender interest, holding costs, agent commissions, and your profit. In hot markets pros stretch to 75%, but never without recomputing the downside.

Calculating Net Flip Profit

The full profit formula sums every dollar leaving your pocket:

Net Profit = ARV − (Purchase Price + Repairs + Lender Fees + Holding Costs + Selling Costs)

Worked example on the same $300K ARV deal:

ARV$300,000
− Purchase Price$160,000
− Repairs$45,000
− Lender Fees (2 pts + $1,500)$4,700
− Holding Costs (6 mo × $1,400)$8,400
− Selling Costs (8% of ARV)$24,000
Net Profit$57,900

Holding Costs: The Silent Profit Killer

Every month you own the house, these costs hit:

  • Hard-money or private-money interest (often 10–13% annualized)
  • Property taxes (escrowed monthly)
  • Vacant-home insurance
  • Utilities — electricity, water, gas kept on for trades
  • HOA dues, lawn care, snow removal

Underwrite for a 6-month hold even if you think you’ll be out in three. Permits slip, trades no-show, buyers’ inspectors find rot.

Estimating Repairs Without Walking the House

A reliable phone-underwriting baseline is $35/sqft for a standard cosmetic rehab in most US markets. Adjust up for older homes or full guts:

  • Built before 1978 → add 10–15% for lead/asbestos surprises
  • Original kitchens and baths → budget $25K–$40K just for those rooms
  • Foundation cracks, roof >20 years old → add $8K–$25K line items

Cash-on-Cash ROI

Profit alone doesn’t tell you if the deal is good. ROI compares profit to the cash you actually had to put in.

ROI = (Net Profit ÷ Total Cash Out of Pocket) × 100

On the example above, if you put down 10% ($16,000) plus rolled the rehab into the loan and paid $4,700 in lender fees plus $8,400 in holding, your cash out is roughly $29,100.

ROI = ($57,900 ÷ $29,100) × 100 = 199%

Pros target 30%+ cash-on-cash per flip; 100%+ is a home run.

When the Deal Doesn’t Pencil: Wholesale It

If the spread is too tight to flip but still under MAO, assign the contract to another investor for a fee.

Assignment Fee = Price to End Buyer − Offer to Seller

Target a minimum $10,000 margin where the spread allows.

Skip the Spreadsheet

FlippingIQ runs all of this — MAO, net profit, ROI, wholesale comparison — the moment you paste an address. Built for live acquisitions calls.

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