Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A flip earns its profit after every cost has come out, and selling costs are the ones that surprise people. Buying at $250,000, spending $75,000 on renovation and $18,000 holding the property, and selling at $425,000 with 7 percent selling costs leaves about $52,250 of profit. That is a 14.0 percent return on the total project cost. The page also works backward from a 15 percent target to the most you could pay for the same project.
Before you rely on it
What to check
Stress the sale price and the renovation cost. A few percent off the sale price or over budget on repairs can remove most of a thin profit.
The common error
Where people go wrong with house flip calculator
Estimating profit from the purchase price and the sale price alone. Renovation, holding and selling costs together came to more than a quarter of the sale price here.
Sensitivity evidence
How purchase price changes the estimated flip profit
| Purchase price | Estimated flip profit | Return on total project cost | Maximum purchase price for 15% target return |
|---|---|---|---|
| $200,000 | $102,250 | 31.7% | $246,815 |
| $225,000 | $77,250 | 22.2% | $246,815 |
| $250,000worked example | $52,250 | 14.0% | $246,815 |
| $275,000 | $27,250 | 6.9% | $246,815 |
| $300,000 | $2,250 | 0.532% | $246,815 |
Every input, tested
Which input moves the estimated flip profit most
| Input | Tested from | To | Estimated flip profit at each end | Swing |
|---|---|---|---|---|
| Expected sale price | $382,500 | $467,500 | $12,725 to $91,775 | $79,050 (151%) |
| Purchase price | $225,000 | $275,000 | $77,250 to $27,250 | $50,000 (96%) |
| Renovation cost | $67,500 | $82,500 | $59,750 to $44,750 | $15,000 (29%) |
| Selling-cost rate | 6.0% | 8.0% | $56,500 to $48,000 | $8,500 (16%) |
| Holding and financing cost | $16,200 | $19,800 | $54,050 to $50,450 | $3,600 (6.9%) |
Two variables at once
Estimated flip profit by purchase price and renovation cost
| Purchase price \ Renovation cost | $60,000 | $75,000 | $90,000 |
|---|---|---|---|
| $200,000 | $117,250 | $102,250 | $87,250 |
| $225,000 | $92,250 | $77,250 | $62,250 |
| $250,000 | $67,250 | $52,250 | $37,250 |
| $275,000 | $42,250 | $27,250 | $12,250 |
| $300,000 | $17,250 | $2,250 | -$12,750 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Purchase price | $250,000 |
| Renovation cost | $75,000 |
| Holding and financing cost | $18,000 |
| Expected sale price | $425,000 |
| Selling-cost rate | 7.0% |
| Estimated flip profit | $52,250 |
| Return on total project cost | 14.0% |
| Maximum purchase price for 15% target return | $246,815 |
Where the inputs come from
Purchase price is what you pay for the house, renovation cost is a contractor bid including a contingency, holding and financing cost covers loan interest, taxes, insurance and utilities until sale, and the expected sale price should come from recent sales of renovated comparable homes, not the highest listing. The selling-cost rate covers agent commissions and closing costs, often 6% to 8% of the price. Be conservative on the after-repair value.
Using the estimated flip profit in a real decision
Build in room for surprises, which are common.
When the result stops applying
Renovations run over budget and schedule often, and each extra month adds holding costs. The after-repair value is a forecast, and the market can shift before you sell. Taxes on short-term gains are at ordinary income rates. Permits, inspections and financing terms change the numbers. Profit comes with risk of loss.
What to compare it with
Compare with the BRRRR strategy on the BRRRR calculator, and see what the property would earn as a rental on the cap rate and cash flow pages. The price per square foot calculator helps check comps, and the capital gains page explains taxes. Get multiple contractor bids before you buy.
People also ask
Frequently asked questions
What is the 70% rule in house flipping?
A guideline that says to pay no more than 70% of the after-repair value minus renovation costs, leaving room for profit and holding costs.
How much contingency should I include?
Many flippers add 10% to 20% to renovation budgets for unforeseen problems, more for older homes.
Are flip profits taxed as capital gains?
Usually not. Properties held under a year, or flipped as a business, are typically taxed as ordinary income, and self-employment tax may apply.