Frequently Asked Questions
What is ARV and why is it the most important number?
ARV is the estimated market value after all renovations. It determines your maximum purchase price via the 70% rule and sets the ceiling for potential profit. An overestimated ARV is the single biggest cause of unprofitable flips.
What are typical holding costs for a flip?
Hard-money loans typically charge 10-14% annually plus 1-3 points upfront. On a $150,000 loan over 6 months at 12% plus 2 points, the loan holding cost alone is about $12,000. Add taxes, insurance, and utilities.
Should I use hard money or conventional financing for a flip?
Hard money is more common because it closes in days, qualifies based on ARV, and allows renovation draws. It is expensive but the speed and flexibility often justify the cost.
What profit margin is required for a flip to be worthwhile?
A common target is at least 15-20% of ARV as net profit before taxes. The 70% rule is designed to target roughly 20-25% of ARV as the profit buffer after all costs.
Do I pay capital gains or ordinary income tax on flip profits?
If held less than one year, profits are taxed as ordinary income. If held more than one year, long-term capital gains rates apply. Most flips fall under ordinary income treatment.
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This calculator provides estimates for informational purposes only. Results are based on assumptions and may not reflect actual outcomes. Consult qualified professionals in relevant fields before making important decisions based on these results.