Fix and Flip Loan Calculator: How to Estimate Your Profit Before You Buy

How to Calculate Fix and Flip Profit

Every successful flip starts with the numbers. Before you make an offer on a property, you need to know three things: what it will cost, what it will be worth after renovation, and how much profit is left after all expenses. This guide walks you through the math, step by step.

The Core Formula

Flip Profit = ARV - Purchase Price - Rehab Costs - Holding Costs - Selling Costs - Loan Costs

Let us break down each component with a real-world example.

Step 1: Estimate the After Repair Value (ARV)

ARV is what the property will sell for after your renovation is complete. This is the most important number in any flip analysis.

How to estimate ARV:

Pull 3-5 comparable sales (comps) within 0.5 miles, sold in the last 6 months

Adjust for differences in square footage, bedrooms, bathrooms, lot size, and finishes

Use the average as your baseline

Be conservative — overestimating ARV is the most common flip mistake

Example: You find a distressed 3/2 SFR listed at $200,000. Comparable renovated homes in the area are selling for $340,000-$380,000. You estimate a conservative ARV of $350,000.

Step 2: Estimate Rehab Costs

Create a detailed scope of work for the renovation. Common rehab costs include:

ItemTypical Cost Range

|------|-------------------|

Kitchen remodel$15,000-$40,000 Bathroom remodel (each)$5,000-$15,000 Flooring (whole house)$5,000-$15,000 Painting (interior/exterior)$3,000-$8,000 HVAC replacement$5,000-$10,000 Roof replacement$8,000-$20,000 Plumbing/electrical updates$3,000-$10,000 Landscaping$2,000-$5,000

Example: Your property needs a full interior renovation. You estimate $65,000 in total rehab costs.

Step 3: Calculate Holding Costs

Holding costs are the monthly expenses you pay while the property is being renovated and marketed for sale. Typical holding period: 4-8 months.

Monthly holding costs include:

Loan interest payment

Property taxes (monthly equivalent)

Insurance

Utilities

HOA fees (if applicable)

Example: With a $233,000 loan at 10% interest-only, your monthly carry is approximately $1,940 in interest alone. Add $300/month for taxes and insurance, and $150 for utilities. Over a 6-month hold period: $14,340 in holding costs.

Step 4: Estimate Selling Costs

When you sell the flipped property, expect to pay:

Real estate agent commissions: 5-6% of sale price

Closing costs (title, escrow, transfer taxes): 1-2%

Staging and marketing: $2,000-$5,000

Example: At a $350,000 sale price with 6% commission and 1.5% closing costs: $26,250 in selling costs.

Step 5: Calculate Loan Costs

Fix-and-flip loans come with upfront costs:

Origination fee: 1-3 points (1-3% of loan amount)

Processing and underwriting fees: $1,000-$2,500

Appraisal: $500-$1,000

Example: On a $233,000 loan with 2 points origination: $4,660 plus $1,500 in fees = $6,160 in loan costs.

Putting It All Together

Using our example:

ComponentAmount

|-----------|--------|

ARV (Sale Price)$350,000 - Purchase Price$200,000 - Rehab Costs$65,000 - Holding Costs (6 months)$14,340 - Selling Costs$26,250 - Loan Costs$6,160 **= Net Profit****$38,250**

Cash invested: With a 90% LTC loan, you bring approximately $26,500 to close (10% of total cost plus loan fees). Your return on invested capital: 144%.

The 70% Rule

A quick screening tool: never pay more than 70% of ARV minus rehab costs.

Max Offer = (ARV x 0.70) - Rehab Costs

In our example: ($350,000 x 0.70) - $65,000 = $180,000 max offer. Since the property is listed at $200,000, you would need to negotiate down or accept slimmer margins.

How 818 Capital Finances Your Flip

As a direct lender, 818 Capital offers fix-and-flip loans with:

Up to 90% of purchase + rehab (LTC)

Up to 75% of ARV

12-18 month terms

Interest-only payments

Draw schedules released as work completes

Close in as fast as 10 days

Our Flip Lab tool analyzes your deal at three ARV scenarios so you can see your profit range before making an offer. Submit your deal at (917) 993-9194 or through our scenario form.