Two numbers decide most wholesale deals: what the house will be worth once it is fixed, and how much room there is between that and everything it costs you to get there.
After-repair value
After-repair value, or ARV, is the price the house should sell for once renovated. It comes from comparable sales: similar houses nearby that sold recently in renovated condition. A good comparable is usually:
- within about half a mile to a mile, in the same kind of neighborhood,
- sold within the last six months,
- close in square footage, beds, baths and age,
- and renovated to the level you plan to finish to.
A price per square foot from the best comparables, times the subject's square footage, gives a first estimate. Where the seller gives comparables, a listing here shows them, and the deal agent uses the lower of the seller's ARV and what the comparables imply.
Spread, before costs
The spread on a listing is ARV − asking − repairs. On a house with a $260,000 ARV, a $150,000 asking price and $40,000 of repairs, it is $70,000. That is not profit. It still has to pay for:
- closing costs when you buy and when you sell,
- holding costs: taxes, insurance, utilities for the months of the work,
- financing, if you borrow,
- selling costs, often around 6% of the sale price with an agent,
- and the repairs you did not see.
The 70% rule
A common rule of thumb for flips: pay no more than 70% of ARV, minus repairs. On the example, that is $260,000 × 0.70 − $40,000 = $142,000. The 30% left is meant to cover costs and profit. It is a screen, not a guarantee, and in expensive markets or on light rehabs investors often go higher. A buy box here can screen on it: set “Asking, at most % of ARV” on your buying criteria.
Try it below with your own numbers.