How flip profit is calculated
Profit = Sale price − Purchase − Rehab − Closing − Holding − Financing − Selling costs
Holding costs are what you pay each month you own the house: taxes, insurance, utilities and loan interest. Selling costs, mostly agent commissions and closing fees, are often 6–10% of the sale price.
Example
You buy at $190,000, renovate for $50,000 and sell for $320,000 six months later. Closing on the purchase costs $3,800, holding costs $9,000, financing $8,000 and selling $25,600. Net profit is $33,600, a 12.9% return on your costs, or about 26% annualized.
Protect your margin
Rehab overruns and slow sales are what sink flips. Add a contingency to the rehab budget, and test the numbers with a lower sale price and a few extra months.
Common questions
What's a good profit on a flip?
Many flippers aim for at least $25,000–$30,000 or 10–15% of the sale price, enough to absorb surprises.
Should I count my own labor?
If you'd otherwise pay a contractor, yes. Otherwise the profit hides how much of it is really wages.