Quick answer
A flipping calculator totals every cost of a buy-renovate-sell project against the expected resale value. Buy at $230,000, spend $50,000 on rehab, hold 6 months at $1,200 a month and sell at a $400,000 after-repair value, and the projected profit is $76,200 — a 19.1% margin on the sale price, before tax. The purchase sits exactly at the 70% rule ceiling of $230,000.
How the Flipping Profit Margin works, step by step
Enter the after-repair value (ARV), the purchase price, the rehab budget, the hold period in months, the monthly holding cost and the selling cost as a percentage of ARV. The calculator adds buying closing costs at a fixed 2% of the purchase price, then nets everything against the ARV to give the projected profit, the return on cash invested and the profit margin.
The 70% rule is the discipline the tool checks first: never offer more than 70% of ARV minus rehab costs. The 30% gap is meant to absorb buying, holding and selling costs plus profit. In the example the $230,000 purchase is exactly at the ceiling, so the deal passes the rule with no room to spare — any price above it fails before the detailed maths even starts.
Holding costs and selling costs are the lines new flippers undercount. Six months at $1,200 a month — loan interest, tax, insurance, utilities — is $7,200, and every extra month of rehab or marketing adds another $1,200. Selling at 8% of ARV costs $32,000 here, the largest single cost after the rehab itself, because commission and closing costs scale with the sale price.
Stress the two inputs that can sink the deal. A 20% rehab overrun adds $10,000 and cuts profit to $66,200 — painful but survivable. A 10% miss on ARV, selling at $360,000 instead of $400,000, cuts profit to $39,400, nearly half gone. ARV evidence from comparable renovated sales matters more than rehab optimism, because an ARV error hits the whole project at once.
Remember the profit shown is before tax, and flip profit is taxed harshly. A regular flipper is a dealer in the IRS's eyes: the property is inventory, not a capital asset, so profit is ordinary income on Schedule C plus self-employment tax of 15.3% on 92.35% of net earnings, with the Social Security portion capped at the $184,500 wage base for 2026. On $76,200 of profit that tax alone is about $10,767.
The formula
Projected profit = ARV − purchase price − rehab − (holding cost per month × months held) − buying costs (2% of purchase) − selling costs (% of ARV). 70% rule maximum offer = (ARV × 0.70) − rehab. Margin = profit ÷ ARV; ROI = profit ÷ total cash in.
Worked example — try it on the calculator above
Worked example: $230,000 purchase, $400,000 ARV
Costs: purchase $230,000; rehab $50,000; holding 6 months × $1,200 = $7,200; buying costs at 2% = $4,600; selling costs at 8% of ARV = $32,000. Total cash in: $291,800. Sale at $400,000 leaves a projected profit of $76,200, a 19.1% margin on the sale price and a 26.1% return on the cash invested, over roughly 7 months. The purchase price equals the 70% rule ceiling exactly, so the deal has no price cushion: a slower sale that adds two months of holding costs takes another $2,400 straight off the profit.
Frequently Asked Questions
What profit margin should a flip target?
Experienced flippers commonly target at least 10% to 15% of the sale price as profit after all costs, because the plan will meet surprises — hidden defects, permit delays, a softening market. Below that, one bad surprise turns the project into unpaid work. The 70% rule exists to enforce roughly this cushion at the offer stage, before emotion enters the negotiation.
How is flip income taxed?
As ordinary business income: property held primarily for sale is inventory, not a capital asset, so profit is taxed at ordinary income tax rates (10% to 37% for 2026) plus self-employment tax of 15.3% on 92.35% of net earnings. Long-term capital gains rates do not apply, and dealer property cannot use a 1031 like-kind exchange. Get tax advice before the first project.
What ARV should I use?
The value supported by recent sales of genuinely comparable renovated properties nearby — adjusted for size, condition and date — ideally pulled from the same data an appraiser will use. Your buyer's lender will order an appraisal that tests it. Using the highest sale in the neighbourhood as the ARV is the most common way flip projections fail.
What does the 70% rule leave out?
Financing structure and tax. The rule assumes your holding cost captures the loan; a hard-money loan with points and a high rate can make the true holding cost far larger than the monthly figure you entered. And the rule says nothing about tax — dealer profit faces income tax plus self-employment tax. Use the rule as a first filter, then run the full calculator and a tax estimate before offering.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.