What to Offer on a House Calculator

Calculate Your Target Purchase Price on Real Estate

Determining what to offer on a house is one of the most critical decisions for home buyers and real estate investors. Offering too much can erase potential profits or result in immediate negative equity, while offering too little might mean losing the deal to competing buyers. This calculator helps you evaluate fair market values, repair budgets, and desired target margins to establish a realistic maximum allowable offer.

How to Calculate What to Offer on a House

The standard formula for estimating your maximum purchase offer accounts for the property's estimated post-renovation value, anticipated repair costs, and your desired discount or profit margin:

$$\text{Offer} = \text{FMV} - \text{COR} - \left( \frac{\text{DD}}{100} \times \text{FMV} \right)$$

Where:

• FMV (Fair Market Value / ARV): The estimated market value of the property after all needed repairs are completed.
• COR (Cost of Renovation): Total expected expense for materials, labor, permits, and contingencies.
• DD (Desired Discount): Your target percentage discount or profit margin (typically 5% to 15% for primary homebuyers, or 30% for house flippers).

The 70% Rule in Real Estate Flipping

Real estate investors frequently rely on the 70% rule to quickly screen potential investment properties. Under this rule, an investor should pay no more than 70% of the After Repair Value (ARV) minus estimated repair expenses:

$$\text{Maximum Offer} = (0.70 \times \text{ARV}) - \text{Renovation Cost}$$