MAXIMUM PURCHASE 
PRICE FORMULA

Learn How to Use the Maximum Purchase Price formula to analyze the Maximum Purchase Price you should offer for a house flip property.

Maximum Purchase Price Formula

The Maximum Purchase Price formula is used to calculate the Maximum Purchase Price you should offer for a property.  The formula uses a detailed analysis of all of the project costs including your Repair Costs, Buying Costs, Holding Costs, Selling Costs, & Financing Costs.

The Maximum Purchase Price formula is the most accurate calculation, because it requires you to think about, consider & calculate every single project cost on the project.
Maximum Purchase Price = After Repair Value - Buying Costs - Holding Costs - Selling Costs - Financing Costs - Repair Costs - Profit

Maximum Purchase Price Example

A flipper finds a distressed property that the seller is asking $85,000 in a neighborhood with $200,000 resale values.  After performing a detailed analysis of all of the project costs the flipper calculates the following costs:
  • Repair Costs = $65,000
  • Buying Costs = $2,000
  • Holding Costs = $3,750
  • Selling Costs = $16,000
  • Financing Costs = $7,500
  • Desired Profit = $30,000
How much should the flipper offer using the MPP Formula?

Answer

Maximum Purchase Price = After Repair Value - Repair Costs - Buying Costs - Holding Costs - Selling Costs - Financing Costs - Profit

Maximum Purchase Price = $200,000 - $65,000 - $2,000 - $3,750 - $16,000 - $7,500 - $30,000

Maximum Purchase Price = $200,000 - $94,250 - $30,000

Maximum Purchase Price = $75,750
In this scenario, the seller is asking for $85,000 which is $10,000 more than the recommended purchase price of MPP Formula.

Deal Analysis Case Study

Learn how to Analyze a House Flip and Create a Professional Investment Report in less than 5 minutes!

In this Case Study, Dave will walk you through the analysis of an example house flipping deal and provide insight on how you can quickly analyze prospective deals in a matter of minutes.
House Flipper
FAQ
When should I use the Max Purchase Price Formula vs the 70% Rule Formula?
The 70% Rule Formula should be used to initially quickly analyze the validity of a deal to see if you should spend more time to fully evaluate the property using the Maximum Purchase Price formula.

If the deal meets your 70% Rule criteria, you can perform a full Maximum Purchase Price analysis to determine the actual purchase price you should offer for the property.

Learn more about the 70% Rule
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Take Action
Now that you know how to analyze a flip deal, start finding and analyzing deals in your marketplace. The more you practice, the better you'll get at quickly valuing potential deals.

Tools to Analyze House Flipping Deals

Notepads/Dirty Used Napkins

If you are the old fashioned pen-and-paper type, a pen and notepad or a used napkin will work just fine...

Good 'ole Trusty Calculator

Listen, there's no crazy calculus  involved in calculating your purchase price, so you don't need a fancy 'Scientific Calculator'....you should be able to use any ordinary calculator or phone app to calculate the MPP.

Spreadsheets

Building your own analysis spreadsheet can help you get a better understanding of the numbers & costs that go into analyzing a deal, but check your formulas twice!

House Flipping Software

Or of course you can use our Flipper Force software which is pre-built with a step-by-step process for analyzing all of the project costs you need to determine the MPP.
House Flipping Software App
NEXT: FORECASTING THE AFTER REPAIR VALUE

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