ARV — After Repair Value
The estimated market value of the property after all renovations are complete. This is the number everything else is built on — if your ARV is wrong, your entire deal is wrong.
MAO — Maximum Allowable Offer
The highest price you can pay for a property and still hit your profit target. Formula: (ARV × 70%) minus rehab costs.
The 70% Rule
A quick filter used by flippers: never pay more than 70% of ARV minus rehab. It builds in your profit margin and a buffer for surprises.
Rehab Budget
The total cost of all repairs and renovations needed to bring the property to its ARV condition. Always add a 10-15% contingency — surprises are guaranteed.
Holding Costs
The monthly expenses you pay while you own the property during rehab — mortgage/hard money interest, taxes, insurance, utilities. Every extra month eats your profit.
Closing Costs
Fees paid at purchase and sale — title, transfer taxes, agent commissions, lender fees. Budget 2-5% of purchase price on the buy side and 6-8% of sale price on the sell side.
Profit Margin
The dollar amount left after subtracting all costs (purchase, rehab, holding, closing) from the sale price. Target a minimum of $25,000-$30,000 for the risk to be worth it.
ROI — Return on Investment
Profit divided by total cash invested, expressed as a percentage. A 20%+ ROI is generally considered strong for a fix and flip.
