How Do You Decide When a Flip Is Worth It in Today’s Market?

Question

For those actively flipping, I’m curious how you decide which projects to take on right now. With material costs, labor availability, and ARVs shifting in different markets, the math on flips can feel a little tighter than it used to.

Do you stick to a specific formula (like 70% rule) or adjust depending on the neighborhood and exit strategy?
Also, how are you factoring in holding costs and potential delays?

Would love to hear how others are stress-testing deals before diving into a new flip in 2025.

Candace Hughes · Answer

Great question, Kelly. As someone who’s managed flips and overseen contractors, I’ve found that stress-testing the numbers up front is key. I still use the 70% rule as a starting point, but I adjust based on neighborhood demand and current rehab costs. On the PM side, I always build in a buffer for labor delays and unexpected repairs, holding costs can eat your profit fast if you don’t plan for them. For me, a deal is worth it if I can run the numbers conservatively and still see solid returns.

Adam Bartomeo · Answer

We aren't flipping. Flipping has too many tax pitfalls and there are too many unknowns - tariffs increasing prices, Days on Market, declining sales prices, etc. Buy rehab, rent, refi, rinse, and repeat.

Patrick Goswitz · Answer

I think the 70% minus repairs is a great baseline. However, how do you know you can't get a better deal? I like to ask the question "if I pay off your mortgage, and there are no fees that you have to pay, how much do you need in your pocket to be able to move onto the next chapter in your life?" (something along those lines)Sometimes the amount they need to net is not as much as what I originally thought, allowing me to offer less and still get them what they asked for. If you only stick to formulas, you're always going to be capping your profits.

Arman Ahmed · Answer

@Kelly Schroeder

Kelly, I focus on stress-testing deals by factoring in realistic ARVs, holding costs, and potential delays, then adjusting the numbers based on neighborhood trends and exit strategy rather than sticking strictly to a single formula. I also keep a buffer for labor/material fluctuations and unexpected rehab surprises. I flip in the Midwest, where disciplined underwriting and accurate projections make the difference between a good flip and a great one.

Jeff S. · Answer

Add the purchase price to the rehab estimate, and together they should not exceed 70% of the ARV. This is the 70% rule of thumb, though you can stretch it to 75% for properties with ARVs above roughly $300,000. Use it only for quick screening only, and always run your numbers in detail. Done correctly, you will predict a profit of about 12%–15% of ARV. As former flippers in the mid-2000s and now private lenders, we consider that a fair profit for you and a safe loan for us.

This rule worked 20 years ago and still holds true today, but don't expect to find properties at 55%–60% of ARV. Lightning strikes occasionally if you're active, but that isn't a business plan. Good deals have always been difficult to find, and “right now” (your words, Kelly) is no exception.

From 2010 until a year or two ago, you could usually count on selling at or above ARV, so we sometimes pushed the rule by 2 to 3 points. Not anymore. Prices today are flat to dropping in most markets, so your ARV estimates should be conservative.  You should also expect longer days on market and not stretch the rule of thumb.

We have heard the same complaints for years about how hard it is to find flips, yet good deals still come across our desk. Do not give up hope, Kelly.

Peter Mckernan · Answer

The numbers for you are subjective, but if you want to go off a rule of thumb I would not use 70% these days more like 55% or 60% due to the market and hold times. Think about and look at DOM for the area and use that as an indicator of how long you will hold it and what the numbers for holding costs look like too as well! These things are a big deal these days. Also see what the comps are looking like in your area, see what they are selling for and if your true ARV is the right ARV for the place. Do not buy any non-functional houses that are really funky, or something that is on a major street etc. in this market you will be stuck with it forever.

How Do You Decide When a Flip Is Worth It in Today’s Market?

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