Question 1

What is the 70% rule in house flipping?

Accepted Answer

The 70% rule states you should pay no more than 70% of a property's after-repair value (ARV) minus the estimated rehab costs. For example, if the ARV is $300,000 and rehab costs are $50,000, your maximum offer should be $300,000 x 0.70 - $50,000 = $160,000.

Question 2

How do you calculate ROI on a house flip?

Accepted Answer

ROI on a flip equals (Net Profit / Total Investment) x 100. Total investment includes purchase price, rehab costs, closing costs (buy and sell), and holding costs. Net profit is the sale price (ARV) minus total investment. A good flip targets at least 15 to 20% ROI.

Question 3

What holding costs should I budget for when flipping a house?

Accepted Answer

Holding costs include monthly loan payments, property insurance, property taxes (prorated), utilities, lawn care, and HOA fees. On a typical deal, budget $2,000 to $3,500 per month. Multiply by your expected holding period (usually 3 to 6 months) to get total holding costs.

Question 4

What is the max allowable offer (MAO) formula?

Accepted Answer

The max allowable offer formula is: MAO = ARV x 70% - Rehab Costs. This ensures you have enough margin for closing costs, holding costs, and profit. Some investors use 65% in hot markets or 75% in buyer-friendly markets.

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