After Repair Value (ARV) Calculator

The 70% Rule Real Estate Investors Use

The 70% rule sets a maximum purchase price at 70% of the after-repair value minus repair costs. For a property with a 300,000 ARV and a 40,000 repair estimate, that cap is 300,000 times 0.70, less 40,000, or 170,000. The calculator applies the same test from the other direction: it checks whether purchase price plus repairs comes in at or below 70% of ARV. On the defaults that is 220,000 against 210,000, so the deal fails by 10,000. The remaining 30% margin is there to cover selling costs, holding costs, contingencies and profit. It works as a screening filter, and the margin is intended to absorb cost overruns rather than to remove risk.

Why Selling Costs Eat Profit

Selling a flip costs money before any profit is counted: agent commission, staging or presentation, legal and completion costs, and tax on the gain depending on holding period and structure. The rate varies enormously by market, which is why it is an input here rather than a constant. On the defaults, 8% of a 300,000 ARV is 24,000 leaving the deal before profit is calculated, and moving that assumption to 10% takes profit from 56,000 down to 50,000 and ROI from 25.45% to 22.73%. These costs are commonly underestimated when planning focuses on the repair budget alone.

ARV Estimation Is Where Deals Go Wrong

ARV is derived from comparable sales of already-renovated properties in the same neighbourhood, not from an estimate of what the finished property feels like it should be worth. The usual standard is several recent comparable sales, in the same or better condition than the renovated property, within a small radius and a recent window. Automated valuation models can diverge materially from realised sale prices, which is why a comparative market analysis from a local agent is the more commonly cited alternative. Published price series are useful for the direction a market is moving, though they cannot substitute for street-level comparables. An inaccurate ARV carries through every other figure the calculator produces, since ARV sits in the profit line, the selling-cost line, the maximum offer and the 70% test.

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. None of that is in this calculation. Expected holding costs can be deducted from the ARV before running the calculator; otherwise the output reads as profit before holding costs. Rehab and resale speed materially affects flip economics, since holding cost accrues monthly while profit does not, so a project running six months instead of three erodes the margin the 70% rule was meant to protect.

Worked Example

Purchase price 180,000, repair costs 40,000, ARV 300,000, selling costs 8%, desired profit 30,000. Selling costs come to 300,000 times 8%, or 24,000. Total all-in cost is 180,000 plus 40,000 plus 24,000, or 244,000. Profit is 300,000 less 244,000, or 56,000, and ROI is 56,000 divided by the 220,000 of purchase and repairs, or 25.45%. The maximum offer for a 30,000 target profit is 300,000 less 40,000 less 24,000 less 30,000, or 206,000. The 70% rule check compares 220,000 against 210,000 and fails by 10,000. Buying at 170,000 instead would pass the test and lift profit to 66,000 at an ROI of 31.43%, which is what the 10,000 of margin is worth.

Common Flip Profit Killers

Repair cost overrun is the most common, which is why a contingency inside the repair budget is standard practice rather than optimism. Market softening during the rehab pulls ARV down after the purchase price is fixed, and cross-country price series show how far and how fast that can move. Holding longer than planned adds cost every month without adding value. Time to sell at full ARV is rarely instant, and a listing that goes stale tends to attract lower offers. Selling costs are often higher than the first estimate once every fee is counted. Each of these is a reason to run the same inputs at pessimistic values: raising repairs from 40,000 to 50,000 alone takes profit from 56,000 to 46,000 and ROI from 25.45% to 20.00%.

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, and running both is common practice, since a property that does not work as a flip can still work as a rental. This calculator addresses flip viability; a rental yield or cash-on-cash calculator addresses the other.