Real Estate Terms for Fix-and-Flip Investors

ARV, maximum allowable offer, the 70% rule, scopes of work, hard-money loans and carrying costs - the terms behind analysing a flip.

Flipping is a project-management business with a real estate exit. The terms here cover how flippers value a property after repairs, set a maximum offer, budget the renovation, finance it and estimate profit.

The journey follows one deal from analysis to sale.

Start here

ARV
After-repair value (ARV) is the estimated market value of a property once planned renovations are finished, based on recent sales of comparable renovated homes. It is used when budgeting a flip, BRRRR or renovation loan, and matters because the purchase price, repair budget and profit are all measured against it.
Maximum Allowable Offer
MAO is the highest price an investor should pay for a fix-and-flip property to hit their target profit, calculated from the after-repair value, renovation costs, and desired margin.
70% Rule
The 70% rule is a fix-and-flip screening formula: pay no more than 70% of a property's after-repair value (ARV), minus the estimated repair costs. The remaining margin is meant to cover holding costs, selling costs and profit, so it is a conservative starting point rather than a guaranteed return.
Scope of Work
A scope of work is a detailed written description of exactly what a renovation project includes — materials, tasks, and timeline — used to set expectations and avoid disputes with a contractor.
Hard Money Loan
A hard money loan is a short-term loan from a private lender, secured by the property itself rather than the borrower's credit — funded faster than a conventional loan, but at higher interest rates and shorter terms, commonly used for fix-and-flip purchases.
Carrying Costs
Carrying costs are the ongoing expenses of owning and holding a property before it produces income or is resold — property taxes, insurance, loan interest, utilities, and HOA fees.

Analyzing a fix-and-flip property, step by step

Profit is made when you buy, if the numbers behind the offer are honest.

  1. STEP 1

    Estimate the after-repair value

    Use recent sales of comparable renovated homes, not list prices.

    Your decision: What will it sell for, realistically, once finished?

  2. STEP 2

    Scope and price the renovation

    A written scope with contractor bids beats a per-square-foot guess.

    Your decision: What work is needed, and what contingency will you carry?

  3. STEP 3

    Set your maximum offer

    Work back from ARV, costs and target profit.

    Your decision: What is the most you can pay and still profit?

    Maximum allowable offer calculator →

  4. STEP 4

    Arrange financing

    Short-term lenders fund purchase and rehab, often in draws.

    Your decision: Cash, hard money or a rehab loan - and at what cost?

  5. STEP 5

    Manage the project

    Every extra month adds interest, taxes, insurance and utilities.

    Your decision: How will you control schedule and change orders?

  6. STEP 6

    Sell - or switch to a rental

    Selling costs come off the top; a soft market may favour renting and refinancing instead.

    Your decision: List, or hold as a rental?

    Fix and flip calculator →

All 16 terms

  • 70% RuleIntermediate

    The 70% rule is a fix-and-flip screening formula: pay no more than 70% of a property's after-repair value (ARV), minus the estimated repair costs. The remaining margin is meant to cover holding costs, selling costs and profit, so it is a conservative starting point rather than a guaranteed return.

  • After-repair value (ARV) is the estimated market value of a property once planned renovations are finished, based on recent sales of comparable renovated homes. It is used when budgeting a flip, BRRRR or renovation loan, and matters because the purchase price, repair budget and profit are all measured against it.

  • An as-is sale means the seller won't make repairs or credits for any issues found during inspection — the buyer accepts the property in its current condition, though they typically can still inspect and walk away under a contingency.

  • An assignment of contract transfers a wholesaler's rights and obligations under a purchase agreement to a new end buyer, in exchange for an assignment fee — the mechanism most wholesale deals use to close.

  • Carrying costs are the ongoing expenses of owning and holding a property before it produces income or is resold — property taxes, insurance, loan interest, utilities, and HOA fees.

  • Comparable sales, or comps, are recently sold properties similar to a subject property in location, size, age, condition and features. Appraisers, agents and investors adjust comps for their differences to estimate the subject property's market value or, for a renovation project, its after-repair value.

  • A contingency budget is money set aside beyond the quoted project cost — typically 10-20% — to cover unexpected issues discovered once work begins, such as hidden water damage or outdated wiring.

  • A double closing is a wholesale strategy where the wholesaler briefly takes actual title to a property in one closing, then immediately resells it to the end buyer in a second closing — used instead of an assignment when the fee needs to stay confidential or the contract restricts assignment.

  • Draw ScheduleIntermediate

    A draw schedule is a payment plan that releases funds to a contractor in installments tied to project milestones, rather than all upfront or all at the end.

  • Fix and FlipIntermediate

    A fix and flip is a real estate investment strategy where an investor buys a property below market value, renovates it, and resells it for a profit, typically within months.

  • General ContractorIntermediate

    A general contractor manages a renovation or construction project end-to-end — hiring and coordinating subcontractors, pulling permits, and overseeing the work to completion.

  • Hard Money LoanIntermediate

    A hard money loan is a short-term loan from a private lender, secured by the property itself rather than the borrower's credit — funded faster than a conventional loan, but at higher interest rates and shorter terms, commonly used for fix-and-flip purchases.

  • MAO is the highest price an investor should pay for a fix-and-flip property to hit their target profit, calculated from the after-repair value, renovation costs, and desired margin.

  • PermitIntermediate

    A permit is official local government approval required before starting certain renovation or construction work, confirming the planned work meets building codes.

  • Scope of WorkIntermediate

    A scope of work is a detailed written description of exactly what a renovation project includes — materials, tasks, and timeline — used to set expectations and avoid disputes with a contractor.

  • Wholesaling is a strategy where an investor puts a property under contract at a below-market price, then assigns or sells that contract to an end buyer for a fee — without ever taking ownership of the property themselves.

Common mistakes

  • Using an optimistic ARV from the best sale in the neighbourhood.
  • Budgeting renovation without bids or a contingency.
  • Forgetting holding costs and selling costs in the profit estimate.
  • Skipping permits, which can delay the sale or reduce the price.

Practical examples

Months matter

On a short-term loan, each extra month of holding costs comes straight out of profit. A two-month permit delay can erase a thin margin.

Selling costs are large

Commission, transfer taxes and concessions at sale can take a significant slice of the after-repair value - more than many first-time flippers budget.

Comparisons and common questions

Calculators and guides

Frequently asked questions

What is the 70% rule in flipping?

A screening rule of thumb: pay no more than 70% of the after-repair value minus repair costs. It leaves room for profit, holding and selling costs, but real budgets decide the deal.

How do flippers finance deals?

Commonly with cash, hard-money loans or short-term rehab loans that fund repairs in draws. These loans cost more than long-term mortgages.

How long does a flip take?

Often several months from purchase to sale, depending on the scope, permits, contractors and how quickly the home sells.

Explore more of the glossary

Definitions are provided for general educational purposes and are not financial, legal, tax, or real estate advice. Rules vary by transaction and location - verify important decisions with qualified professionals.