Glossary
Margin on ARV
Margin on ARV is net profit divided by the sale price. A $36,000 profit on a $300,000 sale is a 12% margin.
ROI tells you how hard your cash worked. Margin tells you how much room you have. It is the share of the sale price that is yours after every cost, so it shows how far the market can move before profit is gone.
How to calculate it
Margin on ARV = net profit / ARV
- ARV
- $320,000
- Net profit
- $35,180
- Margin on ARV ($35,180 / $320,000)
- 11.0%
- Cash invested
- $43,020
- ROI on cash ($35,180 / $43,020)
- 81.8%
The ROI looks huge because of leverage. The 11.0% margin is the better read on risk.
What is a good margin?
Many flippers aim for 10% to 15% of ARV. Run The Deal's flip scoring treats 12% as good and 8% as marginal, and its default MAO target pairs 12% with a $30,000 minimum profit. Lower price points need a higher margin to clear the same dollar profit. Pick one target and use it the same way on every deal, so you can compare them.
What to watch
- Margin and ARV cushion move together. Thin margin means a small price drop erases profit.
- A 12% margin on a $120,000 house is $14,400, which one surprise can wipe out.
- Margin uses net profit. Using gross spread overstates it badly.
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