Why a single ROI number isn't enough
Most flip calculators show you profit and ROI and stop there. The problem: a deal can have a fantastic projected return and still be genuinely risky — because it assumes an aggressive ARV, or a nine-month hold with no cushion, or 95% financing on a thin margin. A single headline number can't show you that. A deal score that only looked at ROI would rate a fragile, over-optimistic deal the same as a genuinely solid one, as long as the ROI number looked good on paper.
The 7 factors, and why each one is there
| Factor | Points | What it measures |
|---|---|---|
| Net Profit Margin | 25 | Profit as a share of total project cost — not just purchase price |
| Cash-on-Cash ROI | 20 | Return scored against a standard 80% financing baseline, not your actual leverage |
| ARV Margin of Safety | 20 | How much the resale value could miss before the deal loses money |
| Holding Period | 10 | Longer holds mean more exposure to rate, market, and cost-overrun risk |
| 70% Rule | 10 | A graduated check against the classic flip heuristic, not pass/fail |
| Financing Risk | 10 | How much of the deal is leveraged |
| Rehab Risk | 5 | Rehab budget as a share of ARV — bigger renovations are more execution-sensitive |
Profit margin and ROI together carry the most weight (45 of 100 points) because return is still the primary thing that makes a deal worth doing. But margin of safety carries nearly as much (20 points) deliberately — it answers a different question than ROI does: not "how much could I make," but "how wrong can my numbers be before I lose money."
Why the ROI score isn't your actual cash-on-cash return
Cash-on-cash ROI is inherently sensitive to how much of your own cash you put in — the same deal returns a much smaller percentage all-cash than it does at 80% financing, purely because the denominator changed, not because the deal itself got worse. Scoring your actual, chosen financing would quietly penalize a buyer for making the safer choice to use less leverage. So the ROI factor is scored against a standard 80% financing assumption regardless of how you actually financed it, while Financing Risk — a separate factor — is the one that rewards or penalizes your real leverage choice. The two questions ("is this a good deal" and "how safely is it financed") stay separate instead of blending into one number. The ROI figure shown elsewhere on the page is always your real, actual return — only the score behind it uses the standard-financing comparison.
Why the score has hard caps
Points alone create a real problem: a deal could score well by stacking up decent-but-not-great numbers across several categories, even if one dimension is genuinely bad. Caps fix this directly:
- Negative net profit caps the score at 0, always.
- Profit margin under 5% caps the score at 49 — can't reach "Good" or "Excellent" no matter what else looks strong.
- ARV margin of safety under 5%, or ROI under 10% caps the score at 59.
- Holding period over 12 months caps the score at 69.
When more than one cap applies, the most restrictive one wins. The tool shows this transparently — if a cap changes your score, it tells you which one and what the uncapped number would have been.
Why the 70% rule is graduated, not pass/fail
The classic 70% rule (max purchase price = ARV × 70% minus rehab) assumes a steep enough discount is available to hit that math — often unrealistic in higher-cost markets, where good deals routinely exceed it. Treating it as a strict pass/fail would unfairly penalize solid deals in those markets. Instead, it contributes a graduated 10 points based on how far above or below the threshold a deal sits, so it stays useful without dominating the score.
Run your own flip numbers, free. CapShark scores your deal across 7 factors — profit margin, ROI, safety margin, holding period, the 70% rule, financing risk, and rehab risk — with hard caps so one great number can't hide a real weakness.
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