What a slow sale costs
| Held for | Holding costs | Total cost | Profit | Margin on ARV |
|---|---|---|---|---|
| 30 days | $2,007 | $278,167 | $71,833 | 20.5% |
| 90 days | $6,020 | $282,180 | $67,820 | 19.4% |
| 270 days | $18,060 | $294,220 | $55,780 | 15.9% |
The 270 day row is the one worth staring at. It is not a disaster scenario, it is a permit delay plus a slow autumn, and on a leveraged deal it is usually the difference between a good year and a bad one.
How the profit is calculated
Profit = ARV - purchase - rehab - buying costs - loan points - holding costs - selling costs
Holding costs are the loan interest on the financed portion plus your monthly taxes, insurance and utilities, multiplied by the months you own it. Return on cash divides the profit by the cash you actually put in: the down payment, the rehab, the buying costs, the points and the carry.
Frequently asked questions
How do you calculate profit on a house flip?
Start with the after repair value, then subtract everything: the purchase price, the rehab budget, the costs of buying, the costs of holding the property for however many months you own it, and the costs of selling. What is left is the profit before tax.
What holding costs should I include?
Loan interest and points, property taxes, insurance, utilities, and any lawn or security service. On hard money these dominate: 200,000 dollars at 11 percent is about 1,833 dollars a month in interest alone, so a three month overrun costs more than most people budget for contingency.
How long should I assume I will hold it?
Model three cases rather than one. Thirty days is an optimistic sale after a fast renovation, ninety is a normal outcome, and two hundred and seventy is what happens when the work runs late and the market slows. If the deal only works at thirty days, it is not a deal.
What is a good profit margin on a flip?
Most experienced flippers want profit to be at least 10 percent of the after repair value, and many will not start below 15 percent on a smaller project, because the fixed costs do not shrink with the deal. A thin margin leaves nothing for the surprise behind the wall.
How is this different from the 70 percent rule?
The 70 percent rule is a ten second screen that tells you the most you can pay. This calculator is the full arithmetic: it takes a real purchase price and shows what you actually earn after every cost, including the months you hold it.
Related calculators
The profit is only as good as the ARV. Run the address through Resideline for the comparable sales behind it.