What's the 70% rule in fix-and-flip?+
Max purchase price ≤ (ARV × 70%) − rehab cost. The remaining 30% covers financing, holding costs, selling costs, and profit margin. If ARV is $300k and rehab is $40k, the 70% rule says don't pay more than (300k × 70%) − 40k = $170k. The rule is a screen, not a guarantee — verify with actual cost modeling.
What's a 'good' flip profit?+
Most experienced flippers target $25-50k net profit per deal in mid-market areas, or 12-20% ROI on total project cost. Anything under $20k profit on a $200k+ project doesn't justify the risk — one surprise (foundation, sewer line, code violation) can wipe it. Anything above 25% ROI usually requires either off-market acquisition or genuine value-add scope.
What rehab costs do I include?+
Hard costs (materials + labor), permits, utility transfers, dumpster, port-a-potty, and 10-15% contingency. Don't forget the project management line if you're hiring a GC (8-15% on top of trade work). Most retail rehab estimates miss permit costs and contingency entirely.
What holding costs should I model?+
Property tax, insurance, utilities, lawn care, debt service (interest on hard money or carry-cost on cash), and HOA if applicable. For a 4-month rehab in a $200k value market, expect $8-15k in holding costs alone. Operators who underwrite '6-month flip' but actually take 9 months get crushed on holding.
What about selling costs?+
Realtor commissions (5-6%), title/escrow (1-2%), transfer tax (0.5-2% depending on state), staging, professional photos, and 1-3% in seller concessions during slow markets. Total selling costs typically run 8-12% of sale price. Skipping this line inflates net profit projections meaningfully.
Should I use hard money or all cash?+
Hard money costs 9-13% interest + 2-3 points origination, but lets you do more deals per year. Cash saves financing costs but limits velocity. For active flippers doing 5+ deals a year, hard money usually wins on annualized ROI because capital recycles. For 1-2 deal/year operators, cash + line of credit is often cleaner.
How long should a flip take?+
From purchase to closing the sale: 4-7 months is typical. Breakdown: 2-4 weeks closing the buy, 8-16 weeks rehab, 2-4 weeks listing/marketing, 4-6 weeks under contract to closed sale. Operators who underwrite '90 days' are usually optimistic — 120-180 days is realistic baseline.
What kills fix-and-flip deals?+
Most common: (1) ARV came in below projection at sale, (2) rehab budget overrun by 30%+, (3) market shifted during the project (rates rose, comps dropped), (4) extended timeline due to permits or contractors, (5) underestimated selling costs or concessions. Build cushions on all 5 — your forecast won't be perfect on any of them.
Fix-and-flip vs BRRRR — which is better?+
Different bets. Flips give immediate cash but trigger ordinary income tax (not capital gains in most cases since held under 1 year). BRRRRs build long-term cash flow + appreciation + depreciation benefits but require longer hold + financing complexity. Active investors often mix: flip for cash velocity, BRRRR for portfolio building.
Do I have to live in the property to qualify for capital gains treatment?+
For Section 121 exclusion ($250k single / $500k married), yes — you need to have lived in it 2 of the last 5 years as primary residence. Most flips are short-term holds, taxed at ordinary income rates as either trade-or-business income or short-term capital gains. Some operators use 'live in flip' strategies to capture Section 121, but that means 2+ years per deal.