House Flip Profit Calculator

Understanding the House Flip Profit Calculator

A house flip profit calculator adds up what a project actually costs, including the two categories beginners consistently underestimate, and compares that against the after-repair value. The headline profit is straightforward arithmetic. The reason flips fail is almost never the arithmetic, it's that the ARV was optimistic and the rehab number was a guess.

How it actually works

Enter the purchase price, rehab cost, holding costs, selling costs as a percentage of the sale, and the after-repair value. The calculator computes selling costs from the ARV, sums all four costs, subtracts from ARV for profit, and divides profit by the cash costs excluding selling costs for ROI. A $180,000 purchase with $45,000 rehab, $9,000 holding costs, 8% selling costs, and a $300,000 ARV gives $258,000 in total costs, $42,000 profit, and a 17.9% return.

The deeper context most people miss

Selling costs are $24,000 on this deal, more than half the profit, and they're the line beginners most often leave out entirely. They cover agent commissions, closing costs, transfer taxes, and title fees, and at 6% to 10% of the sale price they are not a rounding error. A flip modelled without them looks like it makes $66,000 rather than $42,000, which is the difference between a deal worth doing and one that barely compensates for the risk.

The 70% rule and why experienced flippers use a formula rather than intuition

A widely used heuristic in the trade holds that you should pay no more than 70% of the after-repair value minus the rehab cost. On a property with a $300,000 ARV and $45,000 of expected rehab, that gives a maximum purchase price of $300,000 × 0.70 - $45,000, or $165,000. Our worked example purchased at $180,000, which is above that threshold, and the resulting $42,000 profit reflects the thinner margin. The rule exists because it builds in a buffer that covers the costs people forget and the surprises that reliably appear. That 30% spread has to absorb selling costs of 6% to 10%, holding costs that grow with every month of delay, financing costs, rehab overruns, and the real possibility that the ARV estimate was high. What looks like a generous profit margin is mostly a contingency. Experienced flippers treat the rule as a screening filter rather than a target, discarding deals that fail it quickly rather than building elaborate models to justify marginal ones. The most common beginner pattern is the reverse: falling for a specific property, then adjusting the ARV upward and the rehab estimate downward until the spreadsheet produces an acceptable number. The formula's real function is protecting you from your own enthusiasm about a property you've already emotionally committed to.

A worked example: what a three-month delay actually costs

Take the same deal and assume it takes three months longer than planned, which is common. Holding costs, at roughly $3,000 a month covering mortgage interest or hard money payments, property taxes, insurance, and utilities, add another $9,000, taking them from $9,000 to $18,000. Profit falls from $42,000 to $33,000, a 21% reduction, purely from time. Now add a rehab overrun of 20%, which is well within normal variance once walls are opened and problems appear, taking rehab from $45,000 to $54,000. Profit falls to $24,000. Then suppose the market has cooled slightly and the property actually sells for $285,000 rather than $300,000: selling costs fall to $22,800 but ARV falls by $15,000, and profit drops to about $10,200. None of these three assumptions is pessimistic individually, and together they've reduced a $42,000 profit to roughly a quarter of that on a project that consumed months of work and carried real risk. This is why the buffer matters and why deals that only work if everything goes right are the ones that produce losses, since something usually doesn't.

Deciding whether a deal is worth doing at all

Before committing, run the deal at the pessimistic end rather than the expected case, because the expected case rarely happens. Add 20% to the rehab estimate, add two or three months to the timeline and the corresponding holding costs, and reduce the ARV by 5%. If the deal still produces an acceptable profit under those conditions, it has genuine margin. If it turns marginal or negative, you're relying on execution being flawless, which is a poor basis for committing months of work and substantial capital. The second question is what return justifies the risk. A 17.9% return sounds strong until you consider that it took several months of active work, carried the risk of a market shift, and required capital that was fully committed and illiquid throughout. Compare it against the alternative uses of both the money and the time: a passive index investment requires no work and no project risk, and a rental property produces ongoing income rather than a single realisation. Flipping can substantially outperform both, but it's a business rather than an investment, and the return needs to compensate for labour and risk, not just for capital. A deal returning 8% after all costs is generally not worth doing, regardless of how much you like the property.

Why ARV estimates go wrong, and the costs this calculator doesn't ask about

After-repair value is the single most consequential input and the easiest to get wrong, because it's an estimate of what a buyer will pay months from now for a property that doesn't yet exist in its finished form. The disciplined method is to find recent sales of comparable properties, genuinely comparable in size, condition, and location, ideally within the last few months and within a tight radius, and to adjust conservatively. The common errors are using asking prices rather than closed sales, using comparables from a subtly better neighbourhood, assuming your finishes will command a premium buyers won't actually pay, and implicitly assuming the market will be as strong at sale as it was at purchase. Over-improving is a related trap: renovating well beyond the neighbourhood's price ceiling means spending money the market won't return, since buyers in a given area have a fairly hard limit on what they'll pay regardless of finish quality. Separately, this calculator's four cost categories omit several real ones. Financing costs, particularly on hard money loans that commonly carry high rates plus points charged upfront, can be substantial and are sometimes folded into holding costs but often forgotten. Purchase closing costs, inspections, permits, and architectural or engineering fees where structural work is involved all add up. And taxes matter considerably: a flip is generally treated as ordinary income rather than a long-term capital gain, so the after-tax profit can be materially lower than the pre-tax figure this calculator produces.

Variations: the 70% rule, wholesaling, and BRRRR

Several related strategies use overlapping arithmetic. Wholesaling involves contracting a property and assigning that contract to another buyer for a fee without ever renovating or owning it, which eliminates rehab and holding risk entirely in exchange for a much smaller margin. The BRRRR approach, buying, rehabbing, renting, refinancing, and repeating, uses the same purchase and rehab math but ends with a refinance against the improved value rather than a sale, which avoids selling costs and the ordinary income tax treatment of a flip while producing ongoing rental income. Live-in flips, where you occupy the property during renovation, can qualify for primary residence tax treatment in some jurisdictions if ownership and occupancy tests are met, which can substantially change after-tax returns, though they require living in a construction site. Each of these changes which costs apply, so the cost lines here map differently: a BRRRR project cares intensely about ARV for the refinance appraisal but not at all about selling costs, while a wholesale deal cares only about the spread between contract price and what the end buyer will pay.

Evaluating a flip before committing

Screen deals against the 70% rule first, paying no more than 70% of ARV minus rehab, and discard failures quickly rather than building models to justify them. Estimate ARV from recent closed sales of genuinely comparable properties rather than asking prices, and adjust conservatively rather than assuming your finishes command a premium. Add a contingency of at least 20% to any rehab estimate, since opening walls reliably reveals problems. Include selling costs at 6% to 10% of the sale price, since they typically exceed holding costs and are the line most often omitted. Add financing costs and purchase closing costs, which this calculator doesn't ask for. Then re-run the whole thing at the pessimistic end, with a longer timeline and a lower ARV, and only proceed if it still works, because a deal that requires everything to go right usually loses money.

What people get wrong

• Omitting selling costs, which at 6% to 10% of the sale price often exceed holding costs and can consume more than half the projected profit.
• Estimating ARV from asking prices or from comparables in a better area, rather than recent closed sales of genuinely similar properties.
• Budgeting rehab without a contingency, when overruns of 20% or more are routine once walls are opened and hidden problems surface.
• Treating pre-tax profit as the return, when flips are generally taxed as ordinary income rather than at long-term capital gains rates.

Where the math comes from

Selling Costs = After Repair Value × (Selling Costs % / 100). Total Costs = Purchase Price + Rehab + Holding Costs + Selling Costs. Profit = After Repair Value - Total Costs. ROI = Profit / (Purchase + Rehab + Holding Costs) × 100, using cash costs excluding selling costs as the denominator. Financing costs, purchase closing costs, permits, and income tax are not included and will reduce the actual net result.

Questions and answers

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