How to Calculate Fix & Flip Profit (And Not Lose Your Shirt)

The Numbers That Matter in Every Flip

Every fix and flip deal comes down to four numbers: what you buy it for, what you put into it, what it costs to hold it, and what you sell it for. Get any one of those wrong and a profitable flip turns into a loss.

Here's how to run the math before you make an offer.

Step 1: Estimate Your ARV (After Repair Value)

ARV is what the property will be worth after renovations are complete. This is the most important number in your analysis — and the one most investors get wrong.

How to estimate ARV:

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

Adjust for size, condition, lot, and features

Be conservative — use the middle of the range, not the top

Get a broker opinion or preliminary appraisal if the deal is large

Common mistake: Using the highest comp as your ARV. Appraisers rarely hit the top of the range. Budget for 5-10% below your best case.

Step 2: Calculate Total Project Cost

Your total cost includes everything — not just purchase and rehab:

Purchase price — what you're paying for the property

Closing costs (buy side) — title, transfer tax, attorney, typically 2-3% of purchase

Rehab budget — materials, labor, permits, contingency (always add 10-15% buffer)

Holding costs — loan interest, taxes, insurance, utilities during the hold period

Selling costs — agent commissions (5-6%), transfer tax, title, staging

Loan costs — origination fees (1-2 points), appraisal, draw inspection fees

Step 3: The Profit Formula

Profit = ARV - Total Project Cost

Or more specifically:

Profit = ARV - (Purchase + Rehab + Holding Costs + Buy Closing + Sell Closing + Loan Costs)

A Real-World Example

Let's walk through a deal:

Line ItemAmount

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

Purchase Price$200,000 Rehab Budget$75,000 Closing Costs (Buy)$6,000 Loan Origination (2 pts)$5,500 Holding Costs (6 months)$14,000 Selling Costs (6%)$22,500 **Total Cost****$323,000** **ARV****$375,000** **Profit****$52,000**

That's a 16% return on total cost over a 6-month hold. Not bad — but what if your ARV comes in 5% low?

At 95% ARV ($356,250): Profit drops to $33,250

At 90% ARV ($337,500): Profit drops to $14,500

This is why we run three scenarios in Flip Lab. You need to know if a deal still works when things don't go perfectly.

The 70% Rule (And Why It's Not Enough)

The classic rule of thumb: Maximum Purchase = (ARV x 70%) - Rehab Cost

Using our example: ($375,000 x 0.70) - $75,000 = $187,500 max purchase

The 70% rule was designed for a world with lower interest rates and lower carrying costs. In 2026, with bridge loans at 10-12% and holding periods stretching, you may need to use 65% or even 60% depending on your market.

The 70% rule doesn't account for:

Your actual cost of capital

Hold period (a 4-month flip is very different from a 10-month flip)

Selling costs that vary by market

Your specific rehab scope and contingency

Use it as a quick filter, not a decision tool.

How Much Experience Do You Need?

Most bridge lenders tier their terms by experience:

0-2 flips: Lower LTC (80%), higher rates, may need larger reserves

3-5 flips: Standard terms, 85% LTC available

6-10 flips: Better rates, 90% LTC, faster approvals

11+ flips: Best terms, relationship pricing, higher leverage

If this is your first flip, don't let that stop you. It just means you need stronger numbers on the deal itself.

Run Your Numbers Through Flip Lab

Our Flip Lab analyzer runs your deal at three ARV scenarios instantly — 100%, 95%, and 90% of your projected ARV. You'll see profit margins, max LTC, and whether the deal has enough cushion to survive a market adjustment.

Submit your numbers. Know your risk before you sign.