What Goes Into a Fix-and-Flip Analysis
Analyzing a fix-and-flip deal requires estimating five key numbers: ARV, repair costs, holding costs, transaction costs, and your maximum offer price. Miss any one of these, and your profit projection falls apart.
This guide walks through each component in order, so you can confidently underwrite any flip opportunity.
Step 1: Estimate the ARV
The after-repair value is the anchor of your entire analysis. Everything else — your offer price, renovation budget, and profit target — flows from this number.
Pull 3–6 comparable sales of recently renovated properties in the same area. Adjust for differences in size, features, and condition. For a detailed walkthrough, see our guide to running comps.
Step 2: Estimate Repair Costs
Walk the property (or review photos and inspection reports) and create a scope of work. Break costs down by category:
- Cosmetic: Paint, flooring, fixtures, landscaping ($10–$25/sqft)
- Kitchen/bath remodel: $5,000–$25,000 per room depending on scope
- Structural/mechanical: Roof, HVAC, plumbing, electrical (get contractor bids)
- Contingency: Add 10–15% for unexpected issues
The most common mistake new flippers make is underestimating repairs. Always get at least two contractor estimates before committing to a deal.
Underwrite flips faster
Revaluno's Fix & Flip Calculator combines ARV estimation, comp analysis, and deal underwriting in one workflow.
Try the Fix & Flip Calculator
Step 3: Calculate Holding Costs
Holding costs are the expenses you incur every month you own the property. They include:
- Loan interest: Hard money rates typically range from 10–14% annually
- Property taxes: Prorated for your hold period
- Insurance: Builder's risk or vacant property insurance
- Utilities: Electric, water, gas during renovation
- HOA fees: If applicable
Estimate your total hold time — renovation + listing + closing — and multiply monthly costs accordingly. Most flips take 4–8 months from purchase to sale.
Step 4: Buying and Selling Costs
Don't forget transaction costs on both sides of the deal:
- Buying: Closing costs (1–2% of purchase price), loan origination fees (1–3 points), inspection fees
- Selling: Agent commissions (5–6% of sale price), seller closing costs (1–2%), staging, photography
Total transaction costs typically run 8–12% of the sale price. This is where many new investors miscalculate.
Step 5: Calculate Your Maximum Allowable Offer
The Maximum Allowable Offer (MAO) is the most you should pay and still hit your profit target:
MAO = ARV − Repair Costs − Holding Costs − Transaction Costs − Desired Profit
The 70% rule (MAO = ARV × 0.70 − Repairs) is a useful shortcut for screening deals quickly, but a full cost breakdown is always more accurate.
Step 6: Assess Profit Margin
Once you've calculated all costs, your projected profit is straightforward:
Net Profit = ARV − Purchase Price − Repairs − Holding Costs − Transaction Costs
Experienced flippers typically target a minimum of $25,000 net profit or 15% ROI. If the numbers don't work at your MAO, move on — discipline is what separates profitable flippers from those who lose money.
Frequently Asked Questions
What is a good profit margin on a flip?
Most experienced flippers target a minimum 10–15% net profit margin after all costs. On smaller deals, aim for at least $20,000–$30,000 in net profit to justify the risk and effort.
What is the 70% rule in house flipping?
The 70% rule states that you should pay no more than 70% of a property's ARV minus repair costs. Formula: MAO = ARV × 0.70 − Repair Costs. It's a quick screening tool, not a precise analysis.
How do I estimate repair costs if I'm new?
Start with per-square-foot estimates from local contractors. For light cosmetic work, budget $15–$25/sqft. For full gut rehabs, budget $40–$75/sqft depending on your market.