Question 1

What is the 70% rule in house flipping?

Accepted Answer

The 70% rule states that a real estate investor should pay no more than 70% of the After Repair Value (ARV) minus renovation costs for a flip property. The formula is: Maximum Offer = (ARV × 0.70) − Renovation Costs. The 30% buffer covers holding costs, selling commissions, closing costs, and profit margin. It is a quick screening tool, not a complete financial analysis — always run a full cost breakdown before making an offer.

Question 2

What is ARV and how do I calculate it?

Accepted Answer

After Repair Value (ARV) is the estimated market value of a property after all planned renovations are complete. It is calculated by analyzing comparable sales — similar properties that have sold recently in the same neighborhood, adjusted for square footage, condition, and features. Real estate agents, appraisers, and experienced investors typically estimate ARV by pulling 3–5 recent sold comps and making adjustments. Overestimating ARV is the most common cause of failed flips.

Question 3

What is a realistic ROI target for house flipping?

Accepted Answer

Most experienced flippers target a minimum 15–20% ROI on invested capital per project. After accounting for the time invested, unexpected costs, and the risk of market shifts during the hold period, projects below 15% ROI are generally not worth undertaking. Annualized ROI matters more than project ROI — a 20% ROI on a 3-month project is an 80% annualized return; the same 20% on a 12-month project is just 20%. Faster flips with lower profits can outperform slower flips with higher paper profits.

Question 4

What are the biggest hidden costs that reduce flip profits?

Accepted Answer

The most common profit killers in house flipping are: renovation cost overruns (budget 15–20% contingency), extended hold times due to slow sales markets or contractor delays, financing costs on hard money loans (often 10–14% annualized), unexpected structural or mechanical issues discovered after purchase, and a sale price below ARV estimates. Many new flippers also underestimate buyer agent commissions, title costs, and property taxes during the hold period.

House Flipping ARV Calculator