House Flipping Calculator Formula

Understand the math behind the house flipping calculator. Each variable explained with a worked example.

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Formulas Used

Net Profit

net_profit = profit

Return on Investment

roi = total_investment > 0 ? profit / total_investment * 100 : 0

Total Investment

total_investment_amt = total_investment

Total Selling Costs

total_sell_costs = total_selling_costs

Total Holding Costs

holding_cost_total = total_holding

Profit Margin (% of ARV)

profit_margin = arv > 0 ? profit / arv * 100 : 0

Variables

VariableDescriptionDefault
purchase_pricePurchase Price(USD)200000
rehab_costTotal Rehab Cost(USD)50000
arvAfter Repair Value (ARV)(USD)320000
holding_monthsHolding Period(months)6
monthly_holding_costsMonthly Holding Costs(USD)2000
buying_closing_costsPurchase Closing Costs(USD)5000
selling_commission_pctSelling Commission(%)5
selling_closing_costsOther Selling Costs(USD)3000
total_holdingDerived value= monthly_holding_costs * holding_monthscalculated
selling_commissionDerived value= arv * selling_commission_pct / 100calculated
total_investmentDerived value= purchase_price + rehab_cost + buying_closing_costs + total_holdingcalculated
total_selling_costsDerived value= selling_commission + selling_closing_costscalculated
total_costDerived value= total_investment + total_selling_costscalculated
profitDerived value= arv - total_costcalculated

How It Works

House Flip Profitability Analysis

Flipping houses requires careful analysis of all costs to ensure profitability. Many new flippers underestimate holding costs and selling costs.

Profit Formula

Net Profit = ARV - Purchase Price - Rehab - Closing Costs (buy & sell) - Holding Costs - Commission

Cost Categories

  • Acquisition: Purchase price + closing costs + inspection
  • Rehabilitation: Materials, labor, permits, contingency
  • Holding costs: Loan payments, insurance, taxes, utilities, HOA
  • Selling costs: Agent commission, closing costs, staging

    • Rules of Thumb

  • 70% Rule: Maximum purchase = ARV x 70% - Rehab costs
  • Target minimum profit of $25,000-$30,000 per flip
  • Budget 10-20% contingency on rehab costs
  • Expect 4-8 months total timeline

    • Worked Example

    Buy at $200,000, rehab $50,000, sell at ARV $320,000. 6-month hold at $2,000/month. Buy closing $5,000, sell at 5% commission + $3,000.

    purchase_price = 200000rehab_cost = 50000arv = 320000holding_months = 6monthly_holding_costs = 2000buying_closing_costs = 5000selling_commission_pct = 5selling_closing_costs = 3000
    1. 01Total holding costs: $2,000 x 6 = $12,000
    2. 02Total investment: $200,000 + $50,000 + $5,000 + $12,000 = $267,000
    3. 03Selling commission: $320,000 x 5% = $16,000
    4. 04Total selling costs: $16,000 + $3,000 = $19,000
    5. 05Total cost: $267,000 + $19,000 = $286,000
    6. 06Net profit: $320,000 - $286,000 = $34,000
    7. 07ROI: $34,000 / $267,000 = 12.7%
    8. 08Profit margin: $34,000 / $320,000 = 10.6% of ARV

    Frequently Asked Questions

    What is the 70% rule in house flipping?

    The 70% rule states you should pay no more than 70% of the ARV minus repair costs. For a $320,000 ARV with $50,000 in repairs: $320,000 x 0.70 - $50,000 = $174,000 maximum purchase price. This rule provides a margin for profit and unexpected costs.

    What are typical holding costs?

    Holding costs include hard money loan interest (10-14%), property taxes, insurance, utilities, HOA fees, and lawn care. On a $200,000 property with a hard money loan, expect $1,500-$3,000/month. Every month of delays erodes profit.

    How much rehab contingency should I budget?

    Budget 10-20% above your estimated rehab costs for contingency. Unexpected issues like plumbing problems, structural repairs, or permit delays are common. On a $50,000 rehab, keep $5,000-$10,000 in reserve.

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