What is the 70% rule?

A rule of thumb that you should pay no more than 70% of the after repair value minus repair costs, leaving room for holding costs, selling costs and profit.

How do I estimate ARV?

Use recent sales of comparable, renovated homes nearby. RealtyTrac's sold listings and market trends pages are a starting point; an appraiser or agent can refine it.

How do hard money loans work for flips?

They're short-term loans from private lenders, usually interest-only, with points paid upfront and a term of a year or so. Many lend a share of the purchase and rehab cost or of the ARV and release rehab money in draws. Terms vary widely by lender.

How are flip profits taxed?

A home held a year or less is generally taxed at short-term rates, the same as ordinary income, and frequent flippers may also owe self-employment tax. Your situation depends on how you hold and report the property, so ask a tax professional.

Investing & distressed property

Fix and Flip Calculator

Flips are won or lost on the purchase price. Enter what you'll pay, the rehab budget, the after repair value and your holding and selling costs to see projected profit, return on cash and annualized ROI, plus the maximum offer under the 70% rule.

Projected profit

$26,700

38.5% return on $69,300 of your cash

70% rule: fails. Maximum offer is $165,000 (70% of ARV minus rehab), $15,000 below your price.

Annualized ROI: 91.9%
Profit margin on ARV: 8.9%
Loan amount: $180,000
All-in cost: $273,300

$273,300all-in cost

Purchase price: $180,000
Rehab: $45,000
Selling costs: $24,000
Loan interest & points: $13,500
Holding costs: $7,200
Purchase closing: $3,600

How the flip is analyzed

The formula

Loan amount

Loan = (Purchase price + Rehab) × Loan-to-cost %

Loan-to-cost %: The share of purchase and rehab costs the lender funds

Interest while you hold

Interest = Loan × Annual rate12 × Months held

Annual rate: The loan's interest rate
Months held: Months from purchase to sale

Points

Points = Loan × Points %

Points %: Upfront lender fees as a percentage of the loan

Total cost

Total cost = Purchase price + Purchase closing + Rehab + Holding + Interest + Points + Selling costs

Purchase closing: The purchase price × your closing cost percentage
Holding: Monthly carrying costs (taxes, insurance, utilities) × months held
Selling costs: ARV × your selling cost percentage

Profit

Profit = ARV − Total cost

ARV: After repair value: the expected sale price once renovated

Cash invested

Cash invested = Total cost − Selling costs − Loan

Return on cash

ROI = ProfitCash invested × 100

Annualized ROI

Annualized ROI = ((1 + ROI)^(12 ÷ Months held) − 1) × 100

ROI: Return on cash, as a decimal

70% rule maximum offer

Maximum offer = (ARV × 0.70) − Rehab

The analysis adds up everything the flip costs from purchase to sale and subtracts it from the after repair value (ARV). Financing is modeled the way short-term rehab loans usually work: the lender funds a share of the purchase and rehab, you pay points upfront and interest-only payments while you hold the property, and the loan is repaid from the sale.

Return is measured on your own cash, meaning every cost paid before the sale that the loan doesn't cover. Annualized ROI compounds that return over a 12-month year, so a quick flip shows a higher annualized figure than a slow one with the same profit.

The 70% rule is a screening rule of thumb, not a valuation. A deal can pass it and still lose money if the ARV or rehab budget is wrong, so check both against comparable sales and contractor bids. Loan terms vary widely by lender.

Results are estimates for planning, not a loan offer or financial advice. Lenders, title companies and local rules set the actual figures.

Terms used in this calculator

After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.The 70% RuleInvestingThe 70% rule is a fix-and-flip guideline: pay no more than 70% of a property's after repair value (ARV) minus the cost of repairs. It leaves room for profit, holding and selling costs.Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.Comparative Market Analysis (CMA)Buying & closingA comparative market analysis (CMA) is a real estate agent's estimate of a home's value based on recent sales, pending sales and active listings of similar nearby properties.As-Is SaleBuying & closingAn as-is sale means the seller will not make repairs or offer credits for the property's condition. The buyer accepts the home in its current state, though inspection rights and required disclosures may still apply.Real Estate WholesalingInvestingReal estate wholesaling is putting a property under contract at a discount and then assigning that contract, or reselling the property, to another investor for a fee, without renovating it.REO / Bank-Owned PropertyForeclosure processAn REO (real estate owned) or bank-owned property is a home a lender took back after it failed to sell at foreclosure auction. The lender then sells it, usually through a real estate agent.Resale (After Foreclosure)InvestingA resale is the last stage of the foreclosure lifecycle: a buyer or investor who bought the property at auction or from the bank repairs it, then lives in it, rents it out or sells it again on the open market.

Ready to look at real bank-owned homes?

Browse bank-owned homes across the country on RealtyTrac, with property details, estimated values and foreclosure status.

Search bank-owned homes

Frequently Asked Questions

Guides to read next

Inspecting and Negotiating on a Bank-Owned (REO) PropertyGuide · 7 min readBank-owned homes are sold as-is, often after sitting vacant, so a thorough inspection is the most important step in the purchase. This guide covers how to get the home ready to inspect, what to look for, what banks will and will not negotiate and how to handle appraisal and title issues before closing.Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.

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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.