How this instrument works
After repair value, or ARV, is what a house is worth once the renovation is finished — not what it is worth today. A flipper builds that figure from recent sales of comparable, already-renovated homes nearby, the same way an appraiser would value a finished property. Everything downstream of this calculator depends on that estimate being close to right, because the maximum offer is a percentage of it, not of the property's current condition.
The formula multiplies ARV by an investor rule — commonly 70%, sometimes 65% or 75% depending on the market and the lender — then subtracts the repair budget. The percentage is not profit margin; it is a stand-in for everything a flip consumes besides the purchase price and materials: loan interest on borrowed capital, insurance, utilities and taxes while the property sits unsold, a real estate agent's commission on the eventual sale, and the buffer every renovation needs when a wall comes down and reveals something the inspection missed.
Treat the result as a ceiling, not a target. Paying less than the maximum offer widens the margin the rule is built to protect; paying at or above it removes the cushion entirely. The rule also says nothing about how fast the repair estimate itself might be wrong — a contractor's number gathered before demolition is routinely off by a meaningful percentage once the work actually starts.
- Enter the property's finished value in After repair value, $ — based on comparable sales of renovated homes, not the current listing price.
- Enter your contractor's or your own estimate in Estimated repair cost, $ — the full cost of the renovation, not just cosmetic work.
- Set Investor rule, % to the percentage your market or your lender uses — 70 is the long-standing default among house flippers.
- Read Maximum offer — the highest purchase price that still leaves the rule's built-in margin for financing, holding costs and profit.
- Lower the rule to model a tighter, more conservative margin, or raise the repair estimate to see how a bigger renovation erodes the ceiling.
Worked example — the $300,000 flip
A property will be worth $300,000 once renovated, based on three comparable sales closed in the past six months. The contractor's walkthrough puts the repair budget at $40,000 — new roof, kitchen, and both bathrooms. Applying the classic 70% rule: $300,000 times 0.70 equals $210,000, and subtracting the $40,000 repair budget leaves a maximum offer of $170,000.
That $130,000 gap between the ARV and the maximum offer is not profit sitting in a bank account — it funds the hard-money loan's interest over a six-month hold, the agent's commission on the eventual sale near $300,000, closing costs on both ends, and whatever the repair estimate underestimated. A flipper who offers $200,000 instead of $170,000 on this same house has already spent the cushion before a single wall comes down.
Questions
Why 70% and not the full after-repair value?
Because the purchase price is only one of several costs a flip carries. The 30% gap covers financing interest on the money borrowed to buy and renovate, holding costs like taxes, insurance and utilities during the project, an agent's commission when the finished home sells, and profit — without that gap, a single cost overrun turns the project into a loss.
Is ARV the same as the current appraised value?
No. The current appraised or market value reflects the property's condition today, often needing work. ARV is a forecast — what the same property would sell for once fully renovated to the standard of comparable homes nearby. The two numbers can differ by tens of thousands of dollars on a distressed property.
What if my repair cost estimate turns out too low?
The maximum offer shrinks by exactly that shortfall, dollar for dollar, because repair cost is subtracted directly in the formula. This is why experienced flippers add a contingency — often 10 to 15% on top of the contractor's number — before running the calculation, rather than after the offer is already made.
Should the rule percentage change by property or market?
Yes. A 70% rule is a starting default, not a fixed law. Slower markets, higher financing rates, or a longer expected hold time typically push investors toward a lower percentage like 65%, while fast-moving markets with cheap capital sometimes support 75%. Hard-money lenders often set their own maximum-loan percentage independently of an investor's personal rule.
Does the maximum offer include closing costs on the purchase?
No — the formula covers only the purchase price ceiling implied by ARV, rule and repairs. Title fees, transfer taxes, inspection costs and loan origination fees on the buy side are separate cash outlays that reduce the actual margin further and should be budgeted alongside, not instead of, this figure.
Can the maximum offer come out negative?
Yes, when the repair cost alone exceeds ARV times the rule percentage. A negative result is not an error — it is the calculation telling you no purchase price makes this particular renovation work at your chosen rule, which is precisely the screening job the 70% rule was built to do before an offer goes out.
References
- CFPB — Owning a Home: loan options and renovation financing
- IRS — Real Estate Tax Center for property investors
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.