Flipping looks simple from the outside: buy low, renovate, sell high. The investors who lose money on flips almost never lose it on the renovation itself — they lose it before the first hammer swings, on numbers they never should have accepted.
After-Repair Value (ARV) Comes First
ARV is what the property will sell for once renovated, based on comparable recent sales of similar finished properties nearby. Every other number in a flip — your purchase price, your repair budget, your profit — is derived from ARV. Get this number wrong by even 5-10% and everything downstream of it is wrong too.
The 70% Rule, and Why It's a Starting Point, Not a Law
The common shorthand: don't pay more than 70% of ARV minus repair costs. It's a useful gut-check for a first pass, but it's not sensitive to your market, your holding costs, or how competitive your local buyer pool is. Treat it as a red flag test, not a final answer — a deal that fails the 70% rule badly is worth walking away from; one that's close needs a full underwrite before you decide.
Repair Costs Are Where Most Flips Go Wrong
New investors consistently underestimate repair costs, especially anything behind a wall — electrical, plumbing, foundation issues found mid-renovation. Build in a contingency of 10-15% on top of your contractor estimate, and get more than one bid before you're under contract, not after.
Holding Costs Eat Margin Quietly
Loan interest, insurance, utilities, and property taxes accrue every single day the property sits unsold. A flip that pencils at a 4-month timeline and actually takes 7 can turn a solid profit into a break-even project. Build your holding-cost estimate on your realistic timeline, not your optimistic one.
Selling Costs Are Real Money, Not a Rounding Error
Agent commissions, closing costs, and staging typically run 8-10% of your sale price. New flippers frequently forget to subtract this from their profit projection — and are surprised when their "guaranteed" spread shrinks considerably at the closing table.
Run the Full Math Before You Offer
ARV, repair estimate, holding costs, and selling costs all belong in one underwrite before you make an offer — not sketched on a napkin, run properly. FORGE's Deal Analyzer runs residential comps-based valuation specifically for this scenario, so the math is built once, correctly, instead of re-derived under pressure every time a new property comes across your desk.