How do you guys decide if a flip margin is “safe enough”?

Question

I’ve been spending more time analyzing potential fix and flip deals lately and I keep running into the same question.

On paper some deals look fine, but once I start adding realistic numbers the margin starts shrinking quickly.

For example, a deal might look something like:

Purchase price: around $180k

Estimated rehab: about $65k

ARV: roughly $330k

Once you factor in closing costs, selling costs, holding costs, and a contingency, the potential profit might land somewhere in the $40k–$50k range if everything goes according to plan.

The deal technically works, but it still feels a little tight if something unexpected pops up during the rehab.

I’m curious how experienced flippers here think about this.

Do you have a minimum profit number you look for before taking on a flip?

Or do you look more at percentage margins instead?

Would be interesting to hear how others evaluate this before pulling the trigger.

Bo Smith · Answer

Your gut is right -- that deal feels tight because it is. Let me do the real math on your numbers: 80k purchase, 5k rehab, 30k ARV. You've got 45k in hard costs. Closing costs going in (2%), selling costs (6-7%), and holding costs (3-4 months at maybe .5k/month) eats another 0-35k. That leaves you 0-50k as you said, but that's your contingency. If rehab goes 10% over -- and it usually does -- you're cutting margins to 5-30k. That's not enough buffer.

I personally have a minimum profit rule: 0k absolute floor on any flip, and that's only if the deal is rock solid. Ideally I target 0-50k minimum because the unexpected ALWAYS happens. Lumber spikes, a GC finds hidden water damage, holding costs run longer because the market slows. On your deal, I'd either renegotiate down to 60k, push the ARV higher (which is risky), or pass and find something with tighter mechanics.

Here's the thing -- this market is brutal for flippers right now because your edges are tight everywhere. Material costs, carry costs, competition from buyers. Are you running a cost analysis tool, or are you using rough estimates for the rehab budget? That 5k could be off by 10-15% and kill the deal completely.

Cody Waller · Answer

Those numbers are real close to what I run on most of my deals. 180 purchase, 65 rehab, 330 ARV. On paper that's a clean 85K gross spread before costs.

The problem is "on paper" and "in reality" never match. I've done 22 flips and the margin killer every single time is how long the project takes, not the rehab budget. Your rehab goes 5 months instead of 3 and you just burned an extra 4-6K in carrying costs depending on how you're financing. On HML that adds up fast.

I look at return on the cash I have tied up. 180 plus 65 is 245 in the deal. 40-50K profit on 245K deployed is roughly 16-20%. That's borderline for me. I want 20% minimum and even then I've had deals that looked like 25% on paper and ended up at 12% because the timeline slipped.

Your 65K rehab number is the real question mark. Is that from a real scope of work or a ballpark? Walk the property with someone who does rehab for a living, not a home inspector. Know what's behind the walls before you close. A 65K rehab that turns into 80K because of galvanized pipe or bad framing is the difference between a solid flip and a break-even headache.

Bo Smith · Answer

Your 0-50k profit on a 30k ARV deal is actually thin given today's environment. That's roughly 12% net return on ARV, and most experienced flippers won't touch anything under 15-20% because of hidden costs.

Here's the hard truth: your 5k rehab estimate will probably run 75-80k by the time you find the foundation crack or mold in the wall. It always does. Contingency isn't just hope -- it's acknowledgement that renovations surprise you. I use a minimum 20% contingency on new deals, which on your deal means 78k rehab, not 65k.

Once you plug that in, your profit is probably 25-30k, and that's before holding costs eat you. At 2% a month in hard money interest plus property taxes and insurance, your holding costs could be 12-15k if the sale takes 4-5 months. You're down to 15k profit. That doesn't work.

My rule is simple: if the deal doesn't profit 50k minimum after worst-case rehab, contingency, holding, and selling costs, I pass. Full stop. That means either your purchase price needs to be lower or you're looking for a different property. The deals that feel tight on paper always blow up during execution.

For that specific deal, can you get the purchase price below 170k? That's the only way the numbers actually work.

Peter Mckernan · Answer

You want to look at your profit and ARV and then work backwards. The two biggest variables are rehab costs (change orders, and things found out not calculated in the upfront costs) and holding costs which are really days on market (these days they are expanding quickly).

So if you want to do $40-$50K in profit on a deal. and you know the ARV is $330. Work back from there.

The thing you need to be doing is really knowing the comps, and cross reference the ARV/comps with your trusted realtor and also what are the days on market. What are the actives that are there you are going up against. If there are 20 actives the same model and condition when you go to sell. Your ARV is not $330,000 it will be more like $310K due to the competition.

Lipa F. · Answer

Yes settle your minimum acceptable profit before analyzing the deal.

When I run numbers, I try to look at the worst realistic case, not the best one. That means estimating the ARV a little lower and the rehab costs a little higher than expected, since surprises during renovations are very common.

After that I include closing costs, holding costs, selling costs.

If the deal still meets my minimum profit under those assumptions, then it’s worth considering. If it only works when everything goes perfectly, the margin is probably too thin.

Having that rule ahead of time makes it much easier to stay disciplined and avoid deals that look good at first but don’t leave enough room for risk.

J Castro · Answer

From a lender’s perspective, you’re asking the right question—because most deals don’t fail on paper, they fail on thin margins meeting real-world execution.

A $40K–$50K projected profit can work, but it’s deal- and experience-dependent. What we look for is margin that can absorb:

• Scope creep / unexpected repairs
• Timeline delays (which increase interest + holding costs)
• Appraisal or resale softness

In today’s environment, many lenders like to see:

• At least ~15–20% margin on total project cost, or
• A minimum $30K–$50K net after conservative assumptions

But more importantly—we stress test the deal:

• What happens if rehab goes +10–15%?
• What if the timeline extends 1–2 months?
• What if ARV comes in slightly lower?

If the deal still holds up, it’s solid. If it falls apart quickly, it’s too tight.

It’s not just about the projected profit—it’s about how much cushion you have when things don’t go perfectly (because they usually don’t).

Beau Menegay · Answer

Your gut is right — that deal is tight.

On paper $40k–$50k sounds fine, but in reality flips rarely go exactly to plan. All it takes is:

• an extra $10–15k in rehab
• 1–2 months longer holding time
• a slightly lower sale price

…and that margin can disappear fast.

Most experienced flippers I know look at it from both a dollar amount AND percentage standpoint, not just one.

A few general rules I use:

• Minimum profit: $30k–$50k absolute floor (higher if it’s a heavier rehab)
• Margin: ~15–20%+ of ARV
• All-in rule: staying around 70% of ARV (deal + rehab) as a buffer

For your example:

• Purchase ($180k) + Rehab ($65k) = $245k all-in
• ARV = $330k → you’re at ~74% before even factoring holding/selling

That’s why it feels tight — there’s not much room for error.

The biggest shift for me was stopping asking “does this deal work?” and instead asking:

“How wrong can I be and still make money?”

If the answer is “not very,” I pass.

One thing that helped me a ton was running deals with different scenarios (higher rehab, lower ARV, longer hold) to see how quickly margins collapse. It gives you a much clearer picture of risk vs reward.

Curious what timeline you’re assuming on that deal? That can make or break it too.

Todd Johnson · Answer

Good question and the answer depends on which number you're actually protecting.

Most experienced flippers I've talked to use a minimum dollar threshold AND a percentage floor... not one or the other. Something like: minimum $30k net profit AND minimum 15% ROI on total capital deployed. The deal has to clear both gates.

On your example: $180k purchase, $65k rehab, $330k ARV - your all-in is roughly $245k before closing and holding costs. At $40-50k net you're around 16-20% ROI which is actually reasonable. The tightness you're feeling is the contingency gap, not the margin itself.

The real question is what's your rehab contingency built in at? Most experienced flippers add 15-20% on top of contractor estimates as a buffer. If your $65k rehab estimate already has that baked in, the deal looks different than if it doesn't.

Brooklyn market context matters too... holding costs and selling costs in a high price market eat differently than a $150k ARV market in the midwest.

The deals that actually hurt people aren't the ones that look tight on paper. They're the ones that looked fine until the contractor found something behind the wall on week three.

How do you guys decide if a flip margin is “safe enough”?

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