Fix and Flip Profit Calculator
Analyze your real estate investment potential with precision.
Understanding the Fix and Flip Strategy
Fix and flip is a real estate investment strategy where an investor purchases a property at a discount, renovates it, and sells it for a profit. Unlike long-term rentals, the goal of a flip is to generate a quick capital gain. Success in this field relies heavily on accurate data and strict adherence to budget constraints.
The Core Components of Your Flip
- After Repair Value (ARV): This is the most critical number. It represents what the home will realistically sell for once it is in pristine condition based on comparable sales in the area.
- Purchase Price: The initial capital required to acquire the distressed asset.
- Renovation Costs: Every dollar spent on materials, labor, permits, and contractors. Professional flippers often add a 10-15% contingency for "unforeseen issues."
- Carrying Costs: These are the expenses incurred while holding the property. Even if it's vacant, you must pay property taxes, insurance, and utilities.
- Closing Costs: Often overlooked, these include agent commissions (usually 5-6% when selling) and legal fees for both the purchase and the sale.
The 70% Rule Explained
The 70% Rule is a guideline used by experienced real estate investors to determine the maximum price they should pay for a fix-and-flip property. It suggests that an investor should pay no more than 70% of the After Repair Value (ARV) minus the renovation costs.
Formula: (ARV × 0.70) – Renovation Costs = Maximum Purchase Price
Fix and Flip Example Calculation
Imagine you find a property with an estimated ARV of 400,000. You estimate that 60,000 is needed in repairs. According to the 70% rule, your offer should be:
(400,000 * 0.70) – 60,000 = 220,000
If you purchase for 220,000 and spend 60,000 on repairs, 10,000 on carrying costs, and 24,000 on closing costs, your total investment is 314,000. Your net profit would be 86,000, representing a strong 27.4% ROI.
Critical Tips for Success
Never underestimate renovation costs. It is common for structural or plumbing issues to reveal themselves only after demolition begins. Always perform a thorough inspection and verify the "comps" (comparable property sales) to ensure your ARV is grounded in reality, not optimism.