How flip profit is calculated

A house flip looks simple on Instagram: buy, renovate, sell, profit. In real life, profit is what’s left after every cost gets a turn. The goal of this calculator is to make those costs visible in one place, so you can quickly screen deals and stress-test assumptions before you spend time (or money) on deeper due diligence.

The calculator splits your flip into two sides: (1) Total project cost and (2) Net sale proceeds. Profit is just proceeds minus costs. But the “magic” is in how we layer the costs and how we encourage conservative thinking using buffers.

1) Rehab budget, rehab overrun buffer, and contingency

Most flips blow up in rehab scope and schedule. Even when your contractor is great, older homes hide problems: plumbing surprises, electrical panels, foundation movement, mold, roof patches, code upgrades, and random “while we’re here” changes. That’s why the calculator provides two separate levers:

• Rehab overrun buffer: a stress-test % that inflates the rehab line item.
• Contingency %: a separate contingency line based on base rehab (often 10–15%).

If your deal only works when both buffers are near zero, the deal is fragile. Strong deals still work when you assume the world is a little messy.

2) Buying closing costs

When you purchase, you usually pay lender or escrow fees, title, recording, inspections, appraisal, and local taxes/fees. We model this as a simple percentage of purchase price: Buying closing costs = Purchase price × Buying closing %. If you know your market, replace the % with whatever is typical (2–4% is common, but it varies).

3) Holding costs and time risk

Holding costs are the “silent leak” in flip profitability. Every extra month is money leaving your pocket: utilities, insurance, property taxes, HOA, lawn care, security, and often financing interest. The calculator uses: Holding cost = Monthly holding cost × Holding months.

The holding months slider exists because time is one of the hardest things to estimate. A tight rehab schedule can still be delayed by permits, backordered materials, weather, or contractor availability. Move the slider up and watch the break-even price rise. That’s the reality check.

4) Selling costs: agent commission and seller closing costs

Selling costs are usually percentage-based. If you sell at $350k instead of $330k, your selling costs scale up too. We model two big categories:

• Agent commission = Sale price × Agent commission %
• Seller closing costs = Sale price × Seller closing %

Many flippers underestimate selling costs and overestimate ARV. That combination is dangerous. Use the sale price safety buffer slider (like 5–10%) to test what happens if the market cools or comps come in slightly lower.

5) Financing estimate (optional)

Financing structures can get complicated (interest-only loans, draws, hard money, rehab escrow, etc.). This calculator provides a simple estimate so you can see the direction and magnitude: Interest ≈ Loan amount × Annual rate × (Holding months / 12), plus Points ≈ Loan amount × Points %.

This won’t match every loan product, but it helps you see how financing interacts with holding time. Longer holds plus high rates can turn a “good on paper” deal into a weak one.

6) Net profit, ROI on cash, and break-even sale price

Once we have total project cost and selling costs, we compute:

• Net sale proceeds = Sale price − (Agent commission + Seller closing costs)
• Total project cost = Purchase + Buying closing + Rehab (buffered) + Contingency + Holding + Financing
• Net profit = Net sale proceeds − Total project cost

ROI can be measured multiple ways. Here we use a practical “cash-on-cash” style measure: ROI on cash = Profit ÷ Cash invested. For a financed deal, cash invested is approximated as down payment plus your non-financed costs (rehab + closing + holding + financing fees).

Finally, break-even sale price solves for the sale price that makes profit exactly zero, after percentage-based selling costs. This number is powerful because it turns your flip into a “how much room do I have?” question.

A step-by-step “deal screening” workflow

If you want this tool to be more than a curiosity, use it the same way on every deal. Consistency makes your decisions faster and reduces emotion-driven mistakes.

1. Start with reality-based ARV. Use sold comps, not listings. If you’re unsure, be conservative. Then apply a 5% sale price buffer.
2. Overestimate rehab at first. If you don’t have a detailed scope yet, start with a higher rehab and a 10–20% overrun buffer. You can tighten later when you get bids.
3. Set holding months to your “worst realistic” timeline. Don’t use your best-case schedule. Use the schedule that happens when the city is slow and Home Depot is out of stock.
4. Verify selling costs in your market. Commission and seller costs vary. Enter your best guess and remember: these are % based, so they rise with sale price.
5. Look at three outputs: net profit, ROI, and break-even. A strong deal has cushion on all three.
6. Save the deal snapshot. The save button stores a simple history on your device so you can compare multiple opportunities quickly.

The main reason deals fail isn’t because the investor can’t do math — it’s because the investor assumes the math will happen exactly as planned. Sliders exist to force “what if” thinking. If you can’t make the deal work with realistic buffers, the safest decision is often to pass.

How the Deal Score is computed

The Deal Score is driven mostly by profit margin (profit divided by sale price), with a small penalty for long holding time after six months. Think of it as a quick “how robust is this deal?” signal. Higher score typically means you have more room for mistakes.

Common mistakes this calculator helps catch

• ARV optimism: a small drop in sale price can erase profit once selling costs apply.
• Timeline blindness: 2–3 extra months can add thousands in holding + financing costs.
• Underestimating transaction fees: closing costs and commissions are real and often big.
• Ignoring contingency: unexpected repairs are common, not rare.

Three realistic flip examples (and what to watch)

Example A: The “clean cosmetic” flip

Purchase $240,000 · ARV $335,000 · Rehab $45,000 · Holding $1,800/mo · 6 months · 5% commission · 1.5% seller closing · 2.5% buying closing · 10% contingency · 10% rehab overrun buffer · 5% sale price buffer.

This is the classic paint/floors/kitchen refresh. It can be profitable, but the risk is time. If your six-month plan becomes nine months, your holding cost rises, financing interest rises, and the margin tightens. Slide holding months from 6 → 9 and watch the profit and break-even price change.

Example B: Older home with surprise repairs

If the property is older, increase rehab overrun to 15–25% and contingency to 10–15%. If the deal still scores well, you likely have a margin cushion. If the score drops sharply, you may be paying too much or underestimating rehab.

Example C: Market cools slightly

Try a 10% sale price safety buffer. This simulates a modest market pullback or a lower appraisal. A resilient deal stays profitable even with the buffer. A fragile deal goes negative quickly — and that’s the point of stress testing.

If the deal dies under mild stress, the fix is usually buy price, not “hoping” the market saves you.

Frequently Asked Questions

• Does this include income taxes or capital gains taxes?

  No. Taxes depend on your state, holding period, entity structure, and whether you’re treated as a dealer or investor. Use this as a pre-tax estimate and consult a CPA for your situation.

• What should monthly holding cost include?

  Typical items: interest, property tax, insurance, utilities, HOA, lawn/snow, security monitoring, and small maintenance. If you don’t know, estimate higher — underestimating holding cost is a common beginner mistake.

• Why are there two buffers (sale price buffer and rehab overrun buffer)?

  Flips usually get hit from both directions: costs go up and the market may not cooperate. Buffers let you test whether your deal survives small “normal” setbacks.

• Is the financing estimate accurate for hard money or rehab draws?

  It’s a simplified estimate (interest + points). Real loans may include draw fees, staged funding, and different interest rules. Use it for direction and quick screening, then model your exact loan terms separately.

• What is a “good” flip profit margin?

  It depends on your strategy and risk tolerance. Many investors aim for a meaningful buffer because surprises are normal. If you’re thin on margin, negotiate buy price, shorten timeline, or reduce scope.

• Can this be used for wholesaling?

  Yes, roughly — treat ARV as your assignment price and rehab as your transaction costs. But wholesaling has different economics, so consider using a dedicated wholesale calculator if you do it often.