Every number in a flip calculation is measured against two estimates that you make before you own the house: what it will sell for after the work (After Repair Value, or ARV) and what the work will cost. If either estimate is off by a few percent, the profit figure can change by tens of thousands of dollars. This guide walks through a practical way to build both estimates, using a worked example you can reproduce with the calculator. The numbers are illustrations, not market data for any place.
ARV is the price a buyer would realistically pay for the home after your planned renovation, not what the seller wants today and not the best price you have ever seen on the street. Start by writing down the finished scope in plain words: number of bedrooms and bathrooms, finished square footage, kitchen and bath level, flooring, and any change to the floor plan. A comparable sale only helps if it matches that finished description. A home you are renovating to a mid-range finish should be compared with mid-range finished homes, not with a custom luxury remodel two streets away.
Use closed sales, meaning sales that actually completed, because active listings show asking prices, which are hopes rather than outcomes. Many flippers look for homes that are close by (a short distance, and on the same side of any major road, school boundary or neighborhood line), recently sold (the last few months, since prices move), and similar in size, bedrooms, bathrooms, lot, age and condition after renovation. There is no legal standard for how close or how recent; these are practical guidelines. A real estate agent or a licensed appraiser can pull and check the data, and county records can confirm sale prices in many areas.
Keep at least three comparable sales so that one unusual sale does not decide your number. If one comparable is far above the others, find out why (a corner lot, a pool, a motivated buyer) before you let it pull your estimate upward.
Suppose the house you are considering has 1,750 square feet. You find three closed sales of similar renovated homes nearby:
| Home | Size | Sold for | Price per sq ft |
|---|---|---|---|
| Comparable A | 1,720 sq ft | $272,000 | $158.14 |
| Comparable B | 1,810 sq ft | $285,000 | $157.46 |
| Comparable C | 1,760 sq ft | $281,000 | $159.66 |
The average price per square foot is ($158.14 + $157.46 + $159.66) / 3 = $158.42. Multiply by 1,750 square feet and you get about $277,233. A careful investor rounds down and uses $277,000 as ARV, because the cost of being slightly too low is a missed deal while the cost of being too high is a loss. Price per square foot is only a shortcut: adjust up or down for real differences such as an extra bathroom, a garage, or a smaller lot, and treat the result as a range, not a single exact value.
A repair estimate should come from a walk-through with a contractor and written bids, not from a feeling about how bad the house looks. List each item separately so that you can see what the money is for. In our example:
| Kitchen (cabinets, counters, appliances, labor) | $14,000 |
| Two bathrooms | $6,500 |
| Flooring | $5,200 |
| Interior and exterior paint | $3,800 |
| Electrical and plumbing fixes found in inspection | $4,500 |
| Permits, dumpster and cleanup | $2,000 |
| Subtotal | $36,000 |
Now add a contingency. Older homes in particular often reveal hidden problems once walls and floors are opened. A common rule of thumb among investors is to add roughly 10 to 15 percent to the bid. This is an informal guideline, not a standard, so use more if the house is old, has an unknown history, or you have not worked with the contractor before. At 12 percent, the contingency is $4,320 and the budget becomes $40,320.
With ARV at $277,000 and repairs at $40,320, the 70% rule of thumb gives a maximum offer of ($277,000 x 0.70) - $40,320 = $193,900 - $40,320 = $153,580. Suppose the seller asks $165,000 instead. Add holding costs of $5,000 and selling costs of 6 percent of ARV ($16,620; agent commission and closing costs vary by market and are negotiable, so use your own quote):
| Scenario | Total cost | Estimated profit |
|---|---|---|
| Purchase at $153,580 | $215,520 total cost | $61,480 profit |
| Purchase at $165,000 | $226,940 total cost | $50,060 profit |
Paying the asking price costs you $11,420 of profit, and it is above the rule-of-thumb ceiling. You can enter these exact figures in the calculator and see the same results. The 70% rule is only a screening shortcut; the full calculation is the one that tells you what the deal does to your money. See The 70% Rule Explained.
Before you make an offer, it helps to confirm each input in writing. Use this checklist:
If you cannot fill in a line, treat that gap as a risk to be closed before the offer, not after the closing.
Before relying on either number, ask someone independent to challenge it. A local agent can tell you how quickly homes like yours sell and what buyers in that area expect. An appraiser or a lender who finances renovation projects will apply their own, usually more cautious, valuation. A second contractor bid can reveal missing scope. If your numbers survive these checks, you can have more confidence in the profit estimate; if they do not, you have learned that before spending money. Remember that the calculator reports a pre-tax estimate and does not model financing terms, so if you borrow, include interest and loan fees in holding costs.
Run your own numbers in the calculator, read The 70% Rule Explained, or see the methodology. Guides: estimating ARV and repairs, how flip profits are taxed, holding costs and timeline.