Purchase Price
Quick Answer
The price paid to acquire an investment property, before renovation costs.
Definition
Purchase price is the amount paid to acquire a property, typically negotiated between buyer and seller and formalized in a purchase and sale agreement. For fix-and-flip investors, the purchase price is the foundation of all deal math — it directly affects total project cost, LTC, LTV, and ultimately profit margin. Getting the purchase price right is the first and most important step in any deal.
Why It Matters for Flippers
In real estate investing, you make your money when you buy, not when you sell. An aggressive acquisition price that leaves insufficient margin for rehab, holding costs, and profit will fail regardless of how well the renovation is executed. Investors who underwrite deals with a clear maximum purchase price — based on ARV, rehab, and target profit — consistently outperform those who buy emotionally.
Example in a Flip Deal
ARV: $350,000. Target profit: $40,000. Rehab: $65,000. Holding costs: $18,000. Closing costs: $12,000. Maximum all-in cost: $350,000 - $40,000 - $65,000 - $18,000 - $12,000 = $215,000. Maximum purchase price: $215,000.
Related Terms
ARV (After Repair Value)
The estimated market value of a property after all planned renovations are complete.
As-Is Value
The current market value of a property in its existing condition, before any renovations.
LTC (Loan-to-Cost)
The ratio of the total loan amount to the total project cost (purchase price + rehab budget).
Rehab Budget
The estimated total cost to complete all planned renovations on an investment property.
Holding Costs
The ongoing expenses an investor incurs while owning a property — including interest, taxes, insurance, and utilities — before it is sold or refinanced.