What is the 70% Rule in house flipping?

The 70% Rule is an industry heuristic that says you should pay no more than 70% of the after-repair value (ARV) minus rehab costs for a flip property. So if the ARV is $300,000 and rehab costs are $40,000, the maximum purchase price would be $300,000 × 0.70 − $40,000 = $170,000. The rule originated as a quick way to ensure adequate margin for holding costs, closing costs, and profit. It is a screening tool, not a hard rule — experienced investors in high-cost markets may use 65% or lower.

What is a good ROI for a house flip?

Most experienced flippers target a minimum 15–20% ROI per project, though this depends heavily on deal volume, market conditions, and how you count your own time as a cost. At 20% ROI on a $250,000 project, you make $50,000 gross profit. After accounting for income taxes (flips are taxed as ordinary income, not capital gains), many flippers net 10–15% after-tax. Anything below 10% ROI leaves very little margin for error on a flip.

How do I estimate holding costs for a flip?

Holding costs include hard money loan interest (typically 10–14% annualized), property taxes prorated monthly, utilities, insurance, and any HOA fees. A common shortcut is to estimate 1–2% of ARV per month for all holding costs combined. For a $300,000 ARV property held 6 months at 1.5%/month, holding costs would be approximately $27,000. If you have specific financing terms, calculate the actual monthly interest and add other carrying costs for a more accurate estimate.

What selling closing costs should I expect?

When selling a flipped property, your selling costs typically include real estate agent commissions (2.5–3% per side = 5–6% total), title insurance and escrow fees (0.5–1%), transfer taxes (varies by state and county), and potential seller concessions for repairs or buyer closing costs (0–3%). In total, budget 6–9% of the sale price for selling costs. This is often the most overlooked expense for new flippers.

How accurate is the after-repair value estimate?

ARV accuracy is the single most important factor in a successful flip. To estimate ARV: find 3–5 comparable sales (comps) within 0.5 miles, sold within the past 3–6 months, with similar square footage (within 15–20%), beds/baths, and condition. Adjust for differences. Be conservative — flippers who overpay based on optimistic ARVs are the ones who lose money. Many experienced investors pull comps from the MLS through a real estate agent before making offers.

Should rehab costs include a contingency buffer?

Yes — always add a 10–20% contingency to your initial rehab estimate. Renovation projects almost always encounter unexpected issues: hidden water damage, outdated wiring, plumbing surprises, or permit requirements. First-time flippers tend to underestimate by 20–30%. A detailed scope of work with contractor bids is more reliable than rule-of-thumb estimates. Enter your contingency-inclusive number into this calculator.

Are fix and flip profits taxed as capital gains?

No — if you buy and sell within 12 months (and the property was not your primary residence), flip profits are typically taxed as ordinary income, not at the lower long-term capital gains rate. For most investors in higher brackets, this means paying 22–37% federal income tax on flip profits, plus state income tax. Factor this into your required minimum profit — many flippers target a gross profit that still nets 15%+ after tax.

Fix and Flip Calculator

The Fix and Flip Calculator estimates your potential profit, ROI, and total project cost on any house flip. Enter the purchase price, rehab budget, after-repair value (ARV), and cost percentages for holding and closing to get a realistic profit projection. The calculator also checks your purchase price against the industry-standard 70% Rule to help you avoid overpaying. Use this tool at the analysis stage before making an offer — not after.

Purchase Price

Rehab Costs

Include a 10–15% contingency buffer

Holding Costs

%/mo

% of ARV per month (interest, taxes, utilities, insurance)

Holding Period

months

Buying Closing Costs

% of purchase price (lender fees, title, prepaid)

Selling Closing Costs

% of ARV (agent commissions, title, transfer taxes)

After Repair Value (ARV)

Estimated sale price after all renovations — based on comps

Estimated Profit

$12,700.00

ROI

4.75%

Total Project Cost

$267,300.00

70% Rule — Max Purchase Price

$151,000.00

How to use this calculator

1
Enter the purchase price
The price you are paying (or negotiating) to acquire the property. If you have not yet made an offer, enter several scenarios to see how purchase price affects your profit margin.
2
Enter rehab costs
Your estimated total renovation budget, including materials, labor, permits, and a contingency buffer (typically add 10–15% to your initial estimate for overruns).
3
Set holding costs and months
Holding costs cover mortgage interest, property taxes, utilities, and insurance while you own the property. The default 1% of ARV per month is a common industry estimate — adjust based on your actual financing costs. Enter the number of months you expect to hold the property from purchase to sale closing.
4
Set buying and selling closing cost percentages
Buying closing costs (typically 1–3% of purchase price) cover lender fees, title, and prepaid items. Selling closing costs (typically 5–8% of ARV) cover agent commissions, title insurance, transfer taxes, and seller concessions.
5
Enter the After Repair Value (ARV)
ARV is the estimated market value of the property after all renovations are complete. Base this on comparable sales (comps) in the neighborhood — be conservative. This is the most critical input in any flip analysis.
6
Review profit, ROI, and the 70% Rule check
The calculator shows estimated profit, ROI, total project cost, and the maximum purchase price the 70% Rule allows. If your purchase price exceeds the 70% Rule maximum, the deal may be too thin for most investors.

Formula

Total Invested = Purchase Price + Rehab Costs

Holding Costs = ARV × (Holding Cost % / 100) × Holding Months

Closing Costs (Buy) = Purchase Price × (Buy Closing % / 100)

Closing Costs (Sell) = ARV × (Sell Closing % / 100)

Total Project Cost = Total Invested + Holding Costs + Closing Costs (Buy) + Closing Costs (Sell)

Gross Profit = ARV − Total Project Cost

ROI = (Gross Profit ÷ Total Project Cost) × 100

70% Rule: Max Purchase = ARV × 0.70 − Rehab Costs

The formula accounts for all four categories of cost in a flip: acquisition (purchase + buy-side closing), renovation (rehab), holding (carrying costs while you own), and disposition (sell-side closing). Gross profit is what remains after subtracting all these costs from ARV. The 70% Rule is a quick heuristic from BiggerPockets and the wider investor community: your purchase price should not exceed 70% of ARV minus rehab costs, ensuring enough margin for costs and profit.

Worked Example

Purchase Price: $185,000 Rehab Costs: $45,000 Holding Costs: 1% × $280,000 ARV × 6 months = $16,800 Closing Costs (Buy): 2% × $185,000 = $3,700 Closing Costs (Sell): 6% × $280,000 = $16,800 Total Project Cost: $267,300 After Repair Value: $280,000 Gross Profit = $280,000 − $267,300 = $12,700 ROI = $12,700 ÷ $267,300 × 100 = 4.75% 70% Rule Max Purchase = $280,000 × 0.70 − $45,000 = $151,000 The purchase price of $185,000 exceeds the 70% Rule maximum of $151,000 — the profit margin is thin. Most experienced flippers would pass or renegotiate.

Frequently Asked Questions

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