The formula
Maximum offer ≈ (ARV × 0.70) − repair costs. The 0.70 is meant to bake in your profit, holding costs, and selling costs in one haircut. It's a screen, not gospel.
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Underwriting honestly
Running the numbers
A flip lives or dies on the math you do before you buy — after-repair value, a real repair budget, and every cost between purchase and sale.
Start at the end: after-repair value
Every flip calculation starts with ARV — after-repair value, the price the finished house should realistically sell for. You establish it from recent sales of comparable, renovated homes in the same neighborhood, not from what you hope to get. In an older, varied market like Hot Springs, comps can be uneven street to street, so ARV is a judgment call best made with a local agent or appraiser who knows the block. Everything downstream — your maximum offer, your repair budget, your margin — hangs on getting ARV honest. We don't publish specific local prices here; anchor your ARV to real, recent comparable sales.
The rule of thumb
The 70% rule, spelled out
A widely used screening formula — a general planning frame, not a guarantee of profit.
Repairs come off the top
Subtract a realistic, bid-based repair number — not a hopeful one. Padding this line is where disciplined flippers protect themselves from a bad month.
The 30% isn't all profit
That 30% cushion has to cover carrying costs, financing, closing on both ends, agent commissions, and your margin. Thin ARV or fat repairs can erase it.
Adjust for reality
Some investors use 65% in soft markets or 75% on light cosmetic flips. Treat 70% as a starting dial, tuned to your actual costs and risk.
Carrying costs are the silent margin-killer
The purchase price and the repair budget are the numbers everyone talks about. The one that quietly sinks flips is carrying cost — everything you pay simply to own the house while you fix and sell it. That's loan interest (hard-money and bridge financing isn't cheap), property taxes, insurance on a vacant property, utilities to run the crew, and the ongoing risk that the market moves under you. Every extra month of hold is real money, which is why speed and a reliable crew matter as much as buying right — see our permits & crews guide, because in this market contractor availability, not capital, is usually the true bottleneck.
Build your pro forma with every line in it: purchase price, closing costs on the buy, the full repair budget with a 10–20% contingency, months of carrying cost, financing points and interest, staging, and the selling costs (agent commission and closing) on the exit. When all of that is on the page and there's still a margin you'd accept for the risk, you have a deal. When the margin only appears if you assume the best case on every line, you have a hobby.
Full pro forma
The line items people forget
The deals that go wrong usually go wrong on the costs nobody budgeted for.
Financing cost
Hard-money and bridge loans carry points and higher rates. Interest accrues every day you hold — factor the real cost of money, not just the purchase price.
Hold time
Permit lead times, crew scheduling, and days-on-market all extend the hold. Model a realistic timeline, then add a cushion for Garland County reality.
Two sets of closing costs
You pay to buy and again to sell. Title, transfer, and agent commissions on the exit routinely run several percent of ARV.
Contingency
Rock, rot, rewire, and rain surprises are the constant. A 10–20% repair contingency is discipline, not pessimism.
Want a second set of eyes on a deal?
Share the address, your ARV, and your repair estimate and we'll help you pressure-test whether the numbers really work.
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