Flip Profit Formula: What's Left After the Rehab
Flip profit is what is left after the rehab — and after everything else you spend to buy, hold, finance and sell the house. The short formula most investors use is:
Flip profit ≈ sale price − purchase − rehab − holding costs − buying costs − selling costs − financing costs.
Miss any of the last four lines and the "profit" on your spreadsheet is fiction. This guide breaks each line down, shows a clearly labeled hypothetical example, and points you to the live calculators and earlier ACC Insights posts on ARV, the 70% rule and rehab cost per square foot.
By the ACC Solutions team. Hypothetical dollars below are illustrations only — not Cleveland market rates and not app results.
The Flip Profit Formula, Line by Line
Sale price (or ARV while you are screening). What you expect a finished buyer to pay. While screening, use ARV from sold comps; at exit, use the contract price.
Purchase price. What you pay the seller (or the assignment price you pay into).
Rehab. Hard costs to reach the exit finish, plus contingency.
Holding costs. Everything you spend while you own it.
Buying costs. What it costs to close the purchase.
Selling costs. What it costs to close the sale.
Financing costs. Interest, points and lender fees if you did not pay cash.
Profit is what remains. ROI and annualized ROI are separate questions that divide profit by cash invested and by time — useful later, but only after the dollar profit is honest.
1. Sale Price and ARV
During screening, ARV stands in for sale price. Build it from recent sold comps that match the finished product you plan to deliver. Do not use list price as ARV. Method: how to calculate ARV on a fix and flip.
Before you offer, stress-test profit at ARV minus 5% (or more in a soft pocket). A deal that only works at the top of your ARV range is fragile.
2. Purchase Price
Use the number you will actually have to pay. If you are wholesaling, your basis is what you pay into the deal, not the seller's ask alone. The 70% rule (MAO ≈ ARV × 0.70 − repairs) is a common first filter for purchase price — a rule of thumb, not a guarantee.
3. Rehab
Scope to the exit buyer. Split square-footage costs from per-item costs, and keep a contingency. Under-scoping to force the formula to work is how flips lose money. Guide: estimate rehab costs per square foot. Replace the estimate with bids on one written scope before you lock an offer — see writing a Cleveland rehab scope of work.
4. Holding Costs
Count every month you expect to own the property, then add buffer months for permit delays, contractor gaps and a slow listing:
Property taxes (prorated for the hold)
Insurance
Utilities, lawn, snow, basic security
Loan payments during the hold (if financed)
HOA dues if any
In Cleveland and other Cuyahoga suburbs, older homes often need permit and inspection time — the City of Cleveland's home rehab permit page is the starting point for city properties — and lead-safe work on many pre-1978 homes under the EPA RRP Rule can add calendar days. Extra months are holding costs, not surprises.
5. Buying Costs
Title and escrow / closing fees
Inspections and appraisals (if your lender requires one)
Recording and transfer-related fees where they apply
Lender application or underwriting fees on the purchase loan
Cash buyers still pay title and closing. Do not zero this line.
6. Selling Costs
Listing commissions (both sides if you pay them)
Seller concessions or repair credits at resale
Staging, cleaning, photography, minor punch items
Seller closing costs
A "retail" ARV assumes a retail marketing cost. If you plan a lighter exit (wholesale of the finished house, auction, etc.), change both the sale price and the selling-cost line — do not keep retail ARV with zero commissions.
7. Financing Costs
If you use hard money, private money or a bridge loan, add points, prepaid interest, draw fees and any extension fees you might hit if the project runs long. Cash deals put financing at zero — but only if the cash was truly free of opportunity cost you care about measuring.
We do not publish rates or lender terms here. Use your actual term sheet.
Worked Example (Hypothetical Numbers Only)
All figures below are made up for illustration. They are not Cleveland averages, not A.I. Deal Assistant output and not a promise of results.
Assume a single-family flip:
Expected sale / ARV: $240,000 (hypothetical)
Purchase: $135,000 (hypothetical)
Rehab with 10% contingency: $42,000 (hypothetical)
Holding, 6 months: $9,600 (hypothetical)
Buying costs: $3,400 (hypothetical)
Selling costs (commissions + closing): $16,800 (hypothetical)
Financing (points + interest): $8,200 (hypothetical)
Total costs = $135,000 + $42,000 + $9,600 + $3,400 + $16,800 + $8,200 = $215,000.
Projected profit = $240,000 − $215,000 = $25,000 (hypothetical).
Now the part generic articles skip: the same deal with only purchase + rehab looks like $240,000 − $135,000 − $42,000 = $63,000 "profit." Adding holding, buying, selling and financing removed $38,000 of that illusion. If rehab runs 15% over ($48,300) and sale lands 5% under ARV ($228,000), profit falls to about $7,700 on the same hypothetical stack — thin enough that many investors would have passed at the offer stage.
How This Ties to the 70% Rule
The 70% rule tries to leave room for rehab and profit inside a simple purchase cap. It does not explicitly itemize holding, selling and financing. That is why a deal can pass a quick 70% screen and still fail the full flip profit formula. Run both: use 70% to drop obvious non-starters, then underwrite survivors with every cost line above.
Run the Numbers (Free Calculator + Deal Assistant)
Our free fix and flip profit calculator lets you enter purchase, rehab, holding, buying and selling assumptions in your browser with no sign-up.
When you want a first pass from an address or listing link, the A.I. Deal Assistant pulls ARV from recent comps, gives a rehab estimate, shows projected flip profit and builds a property snapshot. Free tier: 10 searches over 72 hours. Investor Pro - Solo: $47/month for 3,000 searches, with automatic updates and batch search support. Results are estimates to help you screen deals — not appraisals or inspections. 100+ active real estate investors use it.
Questions? Email support@accmgmtsolutions.com or call (216) 238-5999.
Frequently Asked Questions
What is the flip profit formula?
A common way to frame it: Flip profit ≈ Sale price (or ARV) − purchase price − rehab − holding costs − buying costs − selling costs − financing costs. Every line has to be estimated honestly, and the result is still a projection until you have bids and a real exit.
What costs do investors forget when they calculate flip profit?
Holding costs (taxes, insurance, utilities, loan payments), buying and selling closing costs, commissions, concessions, and financing fees. A deal that looks fine on purchase-plus-rehab alone often fails once those lines are added.
Is ARV the same as my expected sale price?
ARV is an estimate of after-repair value from comps. Your actual sale price can be higher or lower. Stress-test profit at a lower sale price before you offer.
Where can I run flip profit numbers quickly?
Use our free fix and flip profit calculator at https://accmgmtsolutions.com/flip-profit-calculator (no sign-up). For a first pass from an address, the A.I. Deal Assistant returns ARV from recent comps, a rehab estimate and projected flip profit — see https://accmgmtsolutions.com/ai-deal-assistant.
Does the A.I. Deal Assistant include financing and selling costs in projected profit?
The sales page says it shows projected flip profit along with ARV and a rehab estimate. Treat that projection as a screen. Before you offer, re-run the full formula with your own holding, buying, selling and financing assumptions, then replace rehab with contractor bids.
