How to Analyze a Flip: The 70% Rule, ARV, and the Costs Beginners Forget
Before you fall in love with a house, you need to know one number: the most you can pay for it and still make money. This is how experienced flippers figure that out in about five minutes — and the costs that quietly kill first-timers' profits.
Start with ARV (After Repair Value)
ARV is what the house will be worth after you fix it up — not what it's worth today. Everything else in the deal is measured against this number, so getting it right matters more than anything.
You estimate ARV using comparable sales ("comps"): recently sold homes near the property that are similar in size, age, and condition to what yours will be after the rehab. Look for sales in the last 3–6 months, within about a half-mile, similar square footage and bed/bath count. Three to five solid comps give you a realistic ARV. If the honest range is wide, use the lower end — conservative math protects you.
The 70% Rule: your quick sanity check
The 70% rule is a back-of-the-napkin formula flippers use to screen deals fast:
The idea: pay no more than 70% of the after-repair value, minus what the rehab will cost. That 30% cushion is meant to cover your holding costs, closing costs, selling costs, financing, and — critically — your profit and a margin for things going wrong.
A worked example
- ARV (from comps): $250,000
- Estimated rehab: $40,000
- 70% of ARV: $250,000 × 0.70 = $175,000
- Max offer: $175,000 − $40,000 = $135,000
So if you can't buy this house for around $135,000 or less, the 70% rule says walk away. It's not gospel — in hot, low-inventory markets experienced flippers sometimes stretch to 75% — but as a beginner, treating 70% as a ceiling keeps you out of thin, risky deals.
The costs beginners forget (and why 30% isn't all profit)
New flippers see that 30% gap and mentally spend it. It's not profit — most of it is real costs. Here's what actually eats it:
| Cost bucket | Typical range | What it is |
|---|---|---|
| Purchase closing costs | 1–3% of price | Title, escrow, inspection, lender fees on the buy |
| Holding costs | $1,000–$3,000+/mo | Loan interest, property tax, insurance, utilities while you own it |
| Financing / points | 2–4 points + interest | Hard-money lenders charge upfront points plus 10–13% interest |
| Selling costs | 5–8% of ARV | Agent commissions, seller closing costs, staging |
| Rehab overrun buffer | 10–20% of rehab | The surprises you always find once walls open up |
On our $250K example, selling costs alone (6% of ARV) are about $15,000. Add a few months of holding at $2,000/mo and financing points, and you can see how a "$40K profit" on paper becomes $20K real — or less if the rehab runs over.
Tools that speed this up
You can run all of this in a spreadsheet (grab our free one below). When you're ready to find and analyze deals at volume, investors commonly use property-data tools like PropStream or DealMachine to pull comps, owner info, and estimated values quickly. (We'll add our reviewed, disclosed links here as we test each tool — we don't link to anything we haven't vetted.)
The bottom line
Analyzing a flip is really three numbers: a realistic ARV from real comps, an honest rehab estimate, and a full accounting of costs. Run the 70% rule as your first filter, then pressure-test the survivors with the full cost list. Deals that still make money after all of that are the ones worth pursuing.