Frequently asked questions
Direct answers to the most common questions about house flipping math, investment strategies, and how to use this tool.
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Calculator basics
- The 70% rule is the foundational house flipping formula: pay no more than 70% of a property's after-repair value (ARV) minus the cost of repairs. Formula: MAO = (ARV × 0.70) − Rehab. The 30% margin covers closing costs, holding costs, financing, and profit.
- ARV stands for After Repair Value — the estimated market value of a property after all planned renovations are complete. It is determined by running comparable sales (comps): similar properties within ½ mile, same bed/bath count, sold within 90 days.
- MAO is the highest price you should pay for a property to hit your profit target. Standard formula: ARV × 70% − Rehab = MAO. For riskier or larger rehabs, use 65% or 60% instead of 70% to build in more cushion.
- Fix and flip profit = Sale price − Purchase price − Rehab costs − Closing costs − Holding costs − Financing costs. The FlipIt calculator handles this automatically and shows net profit, ROI, annualized ROI, and profit margin.
Strategies
- BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You purchase a distressed property, renovate it, rent it out, then do a cash-out refinance based on the improved value. The goal is to recover 100% of your invested capital so you can repeat the process. If you recover all your capital, you achieve an infinite cash-on-cash return.
- Wholesale real estate involves finding a property under contract at a below-market price, then assigning that contract to an end buyer (typically a fix and flip investor) for an assignment fee — without ever taking title to the property. The wholesaler profits from the spread between the contract price and what the buyer pays.
- A land flip involves buying raw land below market value and reselling it at a profit. Land deals have no rehab costs but require due diligence (title search, survey, zoning check), and marketing can take longer. Margins are often larger percentage-wise because there is less competition in land.
- Cash-on-cash (CoC) return is your annual rental cash flow divided by the total cash you have left invested after the refinance. If you refinanced out 100% of your capital, your CoC return is mathematically infinite — you are earning income with none of your own money remaining in the deal.
Costs and numbers
- Buy-side closing costs run 1–3% of the purchase price (title, escrow, inspection). Sell-side costs run 7–9% of the sale price (agent commission 5–6%, transfer taxes, title insurance). Total closing costs on a typical flip: 8–12% of the purchase price.
- Holding costs are ongoing monthly expenses while you own the property: property taxes, homeowners insurance, utilities, HOA fees, and any loan interest. On a typical single-family home, holding costs run $500–$3,000 per month. Every extra month adds directly to your cost basis.
- Hard money loans are short-term, asset-based loans used by real estate investors to finance flips quickly. They are based on the property value, not the borrower's credit. Typical terms: 10–14% annual interest, 2–3 origination points, 6–18 month term. On a $150,000 loan at 12% for 6 months, interest alone is $9,000.
- Most experienced flippers target a minimum of 15–20% ROI per deal, which translates to roughly 30–40% annualized on a 6-month flip. In competitive markets, 10–15% ROI may be acceptable for lower-risk, cosmetic flips. Anything below 10% leaves insufficient margin for cost overruns.
Using FlipIt
- No. The FlipIt calculator is completely free and requires no account. A free account is only needed if you want to save deals and track your projected versus actual returns over time.
- After creating a free account and saving a deal, go to your dashboard. Each deal has a "Log actual numbers" button. After closing, enter your real sale price, total actual costs, and close date. FlipIt shows the variance between your projection and reality.