Why is my flip's profit lower than purchase price plus rehab versus ARV suggests?

Because that simple gap ignores the real costs of doing a flip: closing costs to buy and sell, the interest you carry on the loan while you own the property, and the monthly holding costs of tax, insurance, and utilities. This calculator subtracts all of them, which is why the net profit is smaller, and sometimes negative, compared with the headline spread.

What holding and financing costs do flippers underestimate?

The two biggest are loan interest during the rehab and the monthly holding costs (property tax, insurance, utilities). They are small per month but scale with how long you hold, and a flip that runs months over schedule can have its entire profit eaten by them. This calculator shows both as their own line items.

Is the annualized return realistic?

Only if you actually repeat flips one after another with no gap. Annualizing a 6-month flip assumes you do two identical flips in a year, so a 34% project return becomes about 80% annualized. Most flippers cannot keep capital deployed that continuously, so treat the annualized figure as a way to compare projects, not as yearly income you should expect.

What is the 70 percent rule, and how do the basic and adjusted MAO differ?

The 70 percent rule is a quick ceiling on what to pay for a flip. The basic version sets your maximum allowable offer at 70 percent of the after-repair value minus the rehab budget, leaving a 30 percent margin to cover financing, holding, selling costs, and profit. The adjusted figure here is more conservative: it starts from the basic number and also subtracts your estimated holding and selling costs, so the remaining margin is meant mainly for financing, points, and profit. If your purchase price is above the adjusted MAO, the deal has little room for error.

What is the difference between cash to close and total cash invested?

Cash to close is what you need at the closing table: the down payment, loan points, buying closing costs, and the rehab budget. Total cash invested also adds the financing interest and the monthly holding costs you pay over the hold, so it is larger. The return on cash invested is measured against that larger total, because it is all the money the project ties up, not just what you bring on day one.

Fix and Flip ROI Calculator

Estimate a flip's net profit, ROI, cash to close, and your maximum allowable offer with the 70 percent rule, including the points, financing, and holding costs that quietly sink deals.

Purchase price

What you pay for the property before repairs.

Rehab budget

Total renovation cost. Overruns are common, so be conservative.

After-repair value (ARV)

What you expect to sell for once repairs are done. This is an estimate, not a guarantee.

Holding period

months

How long you own the property. Every extra month adds financing and holding costs.

Down payment

Percent of purchase price paid in cash. The rest is financed.

Loan interest rate

Annual rate on the loan, paid interest-only during the hold. Hard-money rates run high.

Loan points

Upfront loan fee as a percent of the loan amount, paid in cash at close. Hard-money loans often charge 1 to 3 points.

Buying closing costs

Closing costs to buy, as a percent of purchase price.

Selling costs

Agent commission plus closing costs at sale, combined, as a percent of ARV.

Extra selling cost

Fixed selling cost on top of the percent, such as staging or a home warranty. Optional.

Property tax rate

Annual property tax as a percent of purchase price. Accrues monthly while you hold.

Insurance

Annual insurance premium. Accrues monthly while you hold.

Monthly utilities

Electricity, water, and gas during the rehab and listing.

X f in

Net profit

$34,200.00

ARV minus every cost: purchase, rehab, closing, financing, holding, and selling.

Return on cash invested: 28.91%
Annualized return: 66.18%
Max allowable offer (70% rule): $212,500.00
Adjusted max allowable offer: $186,700.00
Total project cost: $340,800.00
Total cash invested: $118,300.00
Cash to close: $105,000.00
Financing cost: $10,000.00
Loan points fee: $0.00
Holding costs: $3,300.00
Selling costs: $22,500.00

Net profit by holding period

Assumptions

Net profit is the after-repair value (ARV) minus the full cost stack: selling costs, purchase price, rehab, buying closing costs, financing interest, loan points, and holding costs. The loan principal nets out, borrowed at purchase and repaid at sale, so only its interest and points show up as a cost.
Financing is interest-only on the loan for the whole holding period, the way hard-money and bridge loans usually work during a flip, with no principal paid down. Loan points are a separate upfront fee, computed as a percent of the loan amount (the purchase price minus your down payment) and paid in cash at close.
Selling costs are a single percent of ARV, with agent commission and sale closing costs combined rather than split, plus any fixed extra selling cost such as staging or a home warranty.
Holding costs are property tax (a percent of the purchase price), insurance, and utilities, and they accrue every month you own the property. These, the points, and the financing interest are the costs flippers most often underestimate.
Return on cash invested is net profit divided by the total cash you deploy over the project (down payment, rehab, buying closing, points, financing interest, and holding). Cash to close is a separate, smaller figure: only the cash due at the closing table (down payment, points, buying closing, and rehab), before the financing and holding that accrue later.
The maximum allowable offer (MAO) uses the 70 percent rule with a fixed 0.70 factor. The basic MAO is 0.70 times ARV minus rehab. The adjusted MAO subtracts your holding and selling costs from the basic figure, so it is always at or below the basic MAO. Financing and points are intentionally not subtracted in the adjusted MAO, because the 30 percent the rule holds back is meant to cover financing, points, and your profit.
Annualized return scales the project ROI to a yearly figure as (1 + ROI) raised to the power of (12 divided by the months held), minus 1. It assumes you immediately repeat an identical flip, which is rarely true, so read it as a way to compare projects, not as expected yearly income.
All figures are in nominal dollars and are not adjusted for inflation. The holding period is treated as whole months, and the monthly holding and financing costs are summed straight across the hold without compounding.
Not modeled: income or capital-gains tax on the profit, the split between agent commission and sale closing costs, loan draw schedules or interest charged only on drawn rehab funds, rehab cost overruns, and any change in market conditions or sale price.
ARV is an estimate that the entire result hinges on. Rehab overruns and longer-than-planned holds are common, and both cut straight into profit.
This is an estimate for educational purposes only, not financial, legal, or tax advice. Your actual costs, loan terms, and sale price will differ, and flipping is a high-risk activity that can lose money. Consult a qualified professional and your lender for numbers specific to your situation.

How it works

A flip is a short project measured in months, and its profit is the after-repair value minus every cost of getting there, not just the purchase price and the rehab. The costs that sink deals are the quiet ones in the middle.

net profit = ARV − selling costs − purchase price − rehab − buying closing − financing − points − holding

Buying closing costs = purchase price × your buy-close percent.
Selling costs = ARV × your sell percent (agent commission plus closing at sale).
Financing = loan amount × (annual rate ÷ 12) × months. Flips are usually carried on interest-only hard-money or bridge loans, so each month adds interest and nothing comes off the principal. The loan principal itself nets out, borrowed to buy and repaid at sale, so only this interest is a cost.
Loan points = loan amount × your points percent, an upfront fee paid in cash at close (hard-money loans often charge 1 to 3 points). It is a one-time cost, not carried monthly.
Holding costs = (property tax ÷ 12 + insurance ÷ 12 + monthly utilities) × months. Small per month, but they scale with every month you own the place.

Financing and holding are the most-omitted costs, and the ones that turn a “profitable” flip negative. That is why this calculator breaks them out as their own results rather than burying them.

return on cash invested = net profit ÷ cash invested

where cash invested = down payment + rehab + buying closing + points + financing + holding (rehab assumed paid in cash). The loan funds the rest of the purchase. Cash to close is a separate, smaller figure: the cash due at the closing table (down payment + points + buying closing + rehab), before the financing and holding that accrue over the hold.

annualized return = (1 + ROI)^(12 ÷ months) − 1

Worked example

$250,000 purchase, $50,000 rehab, $375,000 ARV, 6-month hold, 20% down at 10%, no points, 2% buying closing, 6% selling, 1.2% property tax, $1,800 insurance, $150/month utilities:

Down payment = $50,000; loan amount = $200,000.
Buying closing = $250,000 × 2% = $5,000.
Financing = $200,000 × (10% ÷ 12) × 6 = $10,000.
Monthly holding = $250 tax ($250,000 × 1.2% ÷ 12) + $150 insurance ($1,800 ÷ 12) + $150 utilities = $550; over 6 months, holding = $3,300.
Selling costs = $375,000 × 6% = $22,500.
Net profit = $375,000 − $22,500 − $250,000 − $50,000 − $5,000 − $10,000 − $3,300 = $34,200.
Cash invested = $50,000 + $50,000 + $5,000 + $10,000 + $3,300 = $118,300.
ROI = $34,200 ÷ $118,300 = 28.91%.
Annualized = (1.2891)^(12 ÷ 6) − 1 = 66.18%.

The 70 percent rule gives the most you should pay: basic MAO = 0.70 × $375,000 − $50,000 = $212,500, and the more conservative adjusted MAO = $212,500 − $3,300 holding − $22,500 selling = $186,700. The $250,000 purchase here is above both, which is the rule’s way of flagging a thin deal.

That 66.18% annualized is the number to be careful with. It assumes you immediately roll into a second identical flip and do two in a year. Annualizing a sub-year project always looks impressive, but most flippers cannot keep their capital deployed back to back with no gaps, failed deals, or slow sales. Read the annualized figure as a way to compare projects, not as yearly income to expect.

How costs sink a deal

Take the same purchase and rehab but a softer $330,000 ARV and a 12-month hold. The naive spread, $330,000 minus the $300,000 you put into purchase and rehab, looks like a $30,000 win. Now add the real costs: $5,000 buying closing, $20,000 financing (a full year instead of six months), $6,600 holding, and $19,800 selling. The result is a net loss of $21,400. Nothing changed about the “deal” except time and a softer sale price, and the profit became a loss. This is the single most important thing the calculator is built to show.

Because financing and holding accrue every month, net profit falls the longer you hold. The chart shows exactly that slope: each extra month of carry chips away at the profit, which is why flips that run over schedule are so dangerous.

What is not modeled, and the risks

Loan points are now a dedicated input (a percent of the loan paid upfront), so you no longer fold them into the rehab budget. What is not modeled: income or capital-gains tax on the profit, the split between agent commission and sale closing costs, loan draw schedules or interest charged only on drawn rehab funds, and rehab cost overruns. ARV is an estimate, and the whole result hinges on it: comparable sales can move, and a finish quality that does not match the comps will not fetch the ARV you assumed. Rehab overruns and longer-than-planned holds are common, and both cut straight into a thin margin. Flipping is a high-risk, high-effort activity; treat the output as a planning estimate, not advice, and stress-test a lower ARV and a longer hold before committing.

Sources

U.S. Small Business Administration, business planning guidance
Standard real-estate project accounting: full-cost net profit, return on cash invested, and annualization via compounding the period return.

Frequently asked questions

Why is my flip's profit lower than purchase price plus rehab versus ARV suggests?: Because that simple gap ignores the real costs of doing a flip: closing costs to buy and sell, the interest you carry on the loan while you own the property, and the monthly holding costs of tax, insurance, and utilities. This calculator subtracts all of them, which is why the net profit is smaller, and sometimes negative, compared with the headline spread.
What holding and financing costs do flippers underestimate?: The two biggest are loan interest during the rehab and the monthly holding costs (property tax, insurance, utilities). They are small per month but scale with how long you hold, and a flip that runs months over schedule can have its entire profit eaten by them. This calculator shows both as their own line items.
Is the annualized return realistic?: Only if you actually repeat flips one after another with no gap. Annualizing a 6-month flip assumes you do two identical flips in a year, so a 34% project return becomes about 80% annualized. Most flippers cannot keep capital deployed that continuously, so treat the annualized figure as a way to compare projects, not as yearly income you should expect.
What is the 70 percent rule, and how do the basic and adjusted MAO differ?: The 70 percent rule is a quick ceiling on what to pay for a flip. The basic version sets your maximum allowable offer at 70 percent of the after-repair value minus the rehab budget, leaving a 30 percent margin to cover financing, holding, selling costs, and profit. The adjusted figure here is more conservative: it starts from the basic number and also subtracts your estimated holding and selling costs, so the remaining margin is meant mainly for financing, points, and profit. If your purchase price is above the adjusted MAO, the deal has little room for error.
What is the difference between cash to close and total cash invested?: Cash to close is what you need at the closing table: the down payment, loan points, buying closing costs, and the rehab budget. Total cash invested also adds the financing interest and the monthly holding costs you pay over the hold, so it is larger. The return on cash invested is measured against that larger total, because it is all the money the project ties up, not just what you bring on day one.

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Last reviewed June 2026. For education, not financial advice.