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Sum all cash outlays including interest, taxes, insurance, utilities during hold, and agent commissions at sale.
Total Cost = Purchase + Rehab + Holding + Buying Closing + Selling ClosingAfter-repair value minus all-in costs. Target minimum profit margin per your risk tolerance (often $25k–50k or 15%).
Net Profit = ARV − Total Cost70% rule shortcut: MAO ≈ ARV × 0.70 − Rehab — implies 30% for costs and profit.
MAO = ARV × (1 − Profit% − Selling Costs%) − RehabUpdated: July 2026
3-month hold, $8k holding, 6% selling costs: profit ≈ $52k before taxes. Verify ARV with recent comps.
ARV $300k × 0.70 − $50k rehab = $160k MAO. Pass if asking price exceeds MAO without negotiation room.
Carrying costs erode margin. $3k/month holding × 8 = $24k — flip timeline directly impacts profit.
Model fix-and-flip profitability before making an offer. Enter purchase price, rehab budget, after-repair value (ARV), holding period, and selling costs to calculate net profit, ROI, and maximum allowable offer (MAO).