Fix & flip
Is this house a good flip? Run the numbers before you buy.
Estimate resale value, calculate your maximum offer and test the risks with a complete fix-and-flip profit example.
The short answer
A good flip needs a supported resale price, a priced repair plan and enough room for every cost. Work backward from what a buyer is likely to pay. Subtract repairs, buying and selling costs, financing, holding costs and your target profit to find your maximum purchase price.
A low asking price can get your attention. The full budget tells you whether the opportunity is worth pursuing. Purchase price, repairs and resale value are only part of the picture. The missing costs can change the answer. Here is a practical way to evaluate the whole deal.
Start with what the finished house could sell for
After-repair value, or ARV, means the estimated market value after the planned work is complete. It is an estimate, not a guaranteed selling price. Your renovation plan and your comparison homes must describe roughly the same finished product.
Comparable sales, often called comps, are homes buyers would reasonably compare with yours. Fannie Mae’s appraisal guidance emphasizes physical features and market area. Closed sales are the foundation; listings and pending sales provide supporting context. Its three-closed-comps minimum applies to its appraisal requirements, not to every investor calculation.
Make a short comparison sheet with location, sale date, size, beds and baths, condition, price and important differences. Ask a local agent or appraiser to help explain adjustments. A busy road, awkward layout or inferior lot does not disappear because the kitchen is new.
- Use a realistic range: cautious, expected and optimistic resale values.
- Compare the condition you can actually deliver within the budget.
- Keep the evidence for rejected comps too, so you can explain your choices.
- Do not add renovation spending dollar for dollar to the house’s current value.
Count every dollar between buying and selling
Profit before income tax equals the sale price minus the purchase price and all project expenses. Include both closings, repairs, financing, taxes, insurance, utilities, yard care, marketing and any buyer credits. Obtain property-specific estimates instead of assuming one percentage covers everything.
The example below is invented to show the math. It is not a Georgia cost estimate, a loan quote or a promised return. The repair reserve is assumed to be fully spent. Financing and holding expenses are separate so interest is counted only once.
| Item | Amount |
|---|---|
| Expected sale price | $300,000 |
| Purchase price | − $180,000 |
| Renovation | − $40,000 |
| Extra repair reserve | − $6,000 |
| Buying costs | − $4,000 |
| Loan interest and financing fees | − $10,000 |
| Holding expenses, excluding financing | − $5,000 |
| Selling expenses and buyer credits | − $20,000 |
| Projected profit before income tax | $35,000 |
A loan is a funding source. Do not subtract its principal again from project profit when the purchase and repairs it financed are already included. The payoff does belong in your closing-cash calculation.
Work backward to your maximum offer
Maximum offer = supported resale price − all costs other than purchase − target profit. In the example, costs other than purchase total $85,000. A $35,000 target profit leaves $180,000 for the purchase: $300,000 − $85,000 − $35,000.
If the seller wants $195,000, the projected profit falls to $20,000 unless another supported assumption changes. Raising your resale estimate just to make the purchase work hides the problem. Recheck the evidence, renegotiate or keep looking.
Some expenses change with the purchase price, sale price or length of the project. Recalculate them after changing your offer. A maximum-offer worksheet is a decision tool, not a substitute for inspections or a written financing proposal.
Use the 70% rule only as a rough screen
The familiar shortcut is 70% of ARV minus repairs. With a $300,000 ARV and $40,000 renovation, it suggests $170,000. The remaining 30% is supposed to leave room for other costs and profit. It does not calculate those costs for you.
A percentage cannot tell you whether the roof needs replacing, the permit process is involved or the resale will take longer. Compare the shortcut with your detailed budget. The 70% rule is also separate from a lender’s loan-to-value limit; it does not describe the financing MaxDividend will provide.
Test what happens when the plan gets harder
Use the same $35,000 starting profit and change one assumption at a time. This illustration keeps selling expenses fixed to make the effect easy to see; update variable expenses in your real worksheet.
If the combined outcome leaves too little reward for your cash, time and risk, change the purchase price or pass. Decide your minimum acceptable result before negotiating.
| Change | Effect | Remaining profit |
|---|---|---|
| Sale price falls 5% | − $15,000 | $20,000 |
| Repairs rise $8,000 beyond the planned reserve | − $8,000 | $27,000 |
| Two extra months cost $2,500 each | − $5,000 | $30,000 |
| All three happen | − $28,000 | $7,000 |
Your checklist before committing
A strong deal file explains both the numbers and what is still unknown. Resolve expensive unknowns while you still have the access and contractual rights to investigate.
- Save the comps and write down why the resale range is reasonable.
- Walk the house with the appropriate inspector and contractor; price major systems and visible damage.
- Check the title, access, occupancy and permit history with the appropriate professionals.
- Get buying, borrowing and selling estimates; build a cash schedule as well as a profit budget.
- Run the downside case and set your maximum offer.
- Have your adviser review the inspection, financing and other deadlines in the purchase contract.
Common questions
Is an online home-value estimate enough for ARV?
Use it as a starting point. Verify the actual condition, nearby closed sales and the finished layout. A computer estimate may not know about a damaged foundation or an unpermitted addition.
Can I use the highest sale in the neighborhood?
Only if the property is a convincing comparison and you can explain the differences. Build a range from several relevant sales instead of choosing the one that produces the biggest profit.
What if there are very few comparable sales?
Ask an agent or appraiser to help evaluate a wider area or older sales and explain the differences. Treat a thin market as uncertainty in the purchase decision, not permission to invent a precise value.
How much profit should I target?
There is no universal safe dollar amount. Consider the cash you put at risk, project difficulty, time required and downside result. Set a minimum before making an offer rather than adopting someone else’s social-media return.
Should I include my own labor?
Record your hours and put a reasonable value on them for decision-making. Show both cash profit and profit after your time so you can compare the project with other ways to use your time.
Does paying cash remove holding costs?
It removes loan costs if you truly borrow nothing. Taxes, insurance, utilities, maintenance and the opportunity cost of using your cash still matter.
Is the 70% rule a lender requirement?
No. It is an investor screening shortcut. A lender’s approved advance, valuation method and conditions come from that lender’s written terms.
What is my break-even selling price?
It is the price at which sale proceeds cover all project costs. In the simplified example, it is $265,000 with selling expenses held fixed. In a real budget, recalculate any expenses tied to the selling price.
Sources & context
Sources checked November 9, 2026. This guide provides general information, not advice for your specific legal, tax or financing situation. Examples are hypothetical. Company purchase and loan terms must be confirmed in writing.
Community discussions help identify investors’ questions. They describe personal experiences, not verified results or rules. Official sources support the legal, tax and safety information; project examples are educational.
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