House Flip Calculator
Calculate your potential profit from a house flip including all purchase, renovation, and selling costs.
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About the House Flip Calculator
House flipping looks simple on TV: buy low, fix, sell high. In practice the maths is brutal — between purchase costs, holding costs, rehab, and sale costs, a flip needs about 30% gross margin just to break even. This calculator runs the full numbers; this page shows where most flippers lose money.
The Formula
Profit = Sale price − Purchase price − Rehab cost − Holding costs − Buy/sell transaction costs. Holding costs include monthly interest, property tax, utilities, insurance. Transaction costs typically run 8-10% combined (3-6% sale commission, 2-4% closing costs on buy/sell).
Worked Example
Buy $250,000, rehab $50,000, hold 6 months at $2,000/month carrying = $12,000. Sale at $360,000. Selling costs $25,000 (7%). Buy closing $5,000. Total cost $342,000. Gross profit $360,000 − $342,000 = $18,000 — about a 5% return on the $300,000 invested, before income tax. Tight margin for the risk involved.
The 70% rule
Maximum purchase price = After-Repair Value (ARV) × 0.70 − Rehab cost. So a $400,000 ARV with $60,000 rehab → max buy $220,000. The 30% buffer covers transaction costs, holding costs, and your target profit. Buy too close to ARV and there's no room left.
The hidden costs new flippers miss
Permitting and inspections ($500-5,000). Holding costs while listed (often 2-4 months at $2,000+/month). Scope creep — almost every flip uncovers a 'we have to fix the X too' that adds 10-30% to budget. Income tax — flips held under a year are ordinary income, not capital gains. Effective rate can hit 40%+.
When markets turn
Flipping is most profitable in rising markets and most dangerous in falling ones. If prices drop 5% during your 6-month hold, your 'profit' evaporates and you may sell at a loss. The 2008 housing crash wiped out leveraged flippers who'd assumed appreciation would always continue.
Common Mistakes
- Falling in love with a property and overpaying for the 'potential'.
- Underestimating rehab cost. Always pad your contractor estimate by 20%.
- Not having backup financing for cost overruns. Running out of money mid-rehab kills flips.
- Forgetting income tax. Short-term flips are taxed as ordinary income, often 30-40%.
Frequently Asked Questions
How are flip profits taxed?
Held under a year: ordinary income tax rates plus self-employment tax if flipping is a business. Held over a year: long-term capital gains.
Do I need a real estate license to flip?
Not in most states for your own properties. You do need a contractor's license for work above certain thresholds — varies by state.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.