Glossary
Break-even ARV
Break-even ARV is the lowest sale price at which a flip still does not lose money. The further your ARV sits above it, the safer the deal.
Break-even ARV turns risk into a price you can check against the market. If renovated homes nearby rarely sell below it, you have room. If recent sales sit right at it, you are betting on the top of the range.
How to calculate it
Separate costs that do not change with the sale price from selling costs, which do. Then solve for the price where profit is zero:
Break-even ARV = fixed costs / (1 - selling cost percent)
- Purchase, rehab, closing, loan, interest, holding
- $264,020
- Selling costs (5.5% commission + 1% concessions)
- 6.5% of sale price
- Break-even: $264,020 / 0.935
- $282,374
- Check: $282,374 x 6.5% = $18,354 of selling costs
- $264,020 + $18,354 = $282,374
Simplified, holding other costs fixed. A lower ARV can also shrink a loan capped on ARV.
With an ARV of $320,000, that is an ARV cushion of 11.8%. Run The Deal finds break-even by re-running the full deal at lower prices until profit hits zero, so loan caps and transfer taxes are included.
What to watch
- Break-even rises with every month of delay and every rehab overrun.
- Compare it to the low end of your comps, not the median.
- Break-even means zero profit, not a safe outcome. You still spent months and took the risk.
See how it relates to net profit and margin.
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