After Repair Value (ARV) Calculator

The 70% Rule Real Estate Investors Use

The 70% rule sets a maximum purchase price at 70% of ARV minus repair costs. For a property with 300,000 ARV and a 40,000 repair estimate, that cap is (300,000 × 0.70) - 40,000 = 170,000. The 30% margin covers selling costs (6-8%), holding costs, contingencies, and profit. The rule works as a screening filter, and the margin is intended to absorb cost overruns rather than to remove risk. The calculator flags whether a proposed deal meets this threshold.

Why Selling Costs Eat Profit

Typical selling costs on a flip: agent commissions, often 5-6% of sale price; staging, commonly 500-2,000; closing or completion costs, often 1-2%; and tax on gains depending on holding period and structure. Combined, these commonly total 8-10% of ARV. On a 300,000 flip that is 24,000-30,000 leaving the deal before any profit calculation. These costs are commonly underestimated when planning focuses on repair costs alone.

ARV Estimation Is Where Deals Go Wrong

ARV is commonly derived from comparable sales of already-renovated properties in the same neighbourhood rather than from an estimate of expected value. A widely used standard is three comparable sales from the last 6 months, in the same or better condition than the renovated property, within a small radius. Automated valuation models are commonly reported to diverge from realised sale prices by 10-20%. A comparative market analysis from a local agent is the more commonly cited alternative. An inaccurate ARV carries through every other figure the calculator produces.

Holding Costs the Calculator Does Not Model

Between purchase and sale the investor pays mortgage interest where financed, property tax, insurance, utilities, and any association or service charges that apply. A flip held 6 months might incur 15,000-25,000 in holding costs that further reduce profit. Holding costs can be deducted from ARV before running the calculator; otherwise the output reads as profit before holding costs. Rehab and resale speed materially affects flip economics, and a project running 6 months instead of 3 can reduce profit substantially.

Worked Example

Purchase price 180,000. Repair costs 40,000. ARV 300,000. Selling costs 8%. Desired profit 30,000. Selling costs amount: 300,000 × 8% = 24,000. Total costs: 180,000 + 40,000 + 24,000 = 244,000. Flip profit: 300,000 - 244,000 = 56,000. ROI: 56,000 / (180,000 + 40,000) = 25.5%. Max offer for 30k target profit: 300,000 - 40,000 - 24,000 - 30,000 = 206,000. 70% rule check: 180k + 40k = 220k vs 70% of 300k = 210k. Fails the 70% rule by 10k, so the margin is thin and a cost overrun would absorb the remaining profit.

Common Flip Profit Killers

Repair cost overrun: contingency allowances of 15-25% on repair estimates are common. Market softening during rehab: ARV can drift lower over the project. Holding longer than planned: each additional month adds holding cost, commonly cited in the 2,500-5,000 range. Selling time: time to sell at full ARV is commonly quoted at 30-90 days, and stale listings tend to attract lower offers. Selling costs: 8% is often closer to 10% once all fees are added. The calculator output is one scenario, and running the same inputs at pessimistic values shows how much margin a deal carries.

Flipping vs Rental Property

Flipping is short-term active income, trading time and risk for one large profit per project. Rental property is long-term income accumulated through cash flow plus appreciation. The same property can serve either approach. The ARV calculator addresses flip viability and the rental-yield calculator addresses rental viability. Both are commonly run on the same property, since a property that does not work as a flip can still work as a rental.