Key takeaways
- Net profit = ARV − (purchase + rehab + holding + financing + selling costs).
- The costs that sink flips are the forgotten ones: holding and selling.
- Selling costs run 7–9% of ARV; holding adds 1–2%/month you hold.
- Target a clear margin — many flippers want ≥ $25k or a 10–20% ROI.
What is fix-and-flip profit?
Fix-and-flip profit is the after-repair resale value minus every cost to buy, renovate, hold, finance, and sell the property. What's left is your pre-tax profit — and the costs beginners forget (holding and selling) are usually what erase it.
Worked example
Using the defaults — buy at $180,000, $45,000 rehab, a $300,000 ARV, $8,000 holding, $10,000 financing, 8% selling costs:
- Selling costs: $300,000 × 8% = $24,000
- Total cost: $180k + $45k + $8k + $10k + $24k = $267,000
- Net profit: $300,000 − $267,000 = $33,000
- ROI on cash in ($243,000): 13.6%
A $33k profit looks healthy until the ARV slips or the rehab runs over — both cut straight into that margin, which is why padding estimates matters.
Where the money goes
| Cost | Rule of thumb |
|---|---|
| Selling costs | 7% – 9% of ARV |
| Holding costs | ~1% – 2% of ARV per month held |
| Hard money financing | 1–3 points + 10–14% interest |
| Target net profit | ≥ $25k or 10–20% ROI |
Flipping is tighter than headlines suggest: ATTOM's U.S. Home Flipping Report has put the typical gross flipping ROI near 25–30% in recent years — before holding and selling costs. See the ATTOM Home Flipping Report.
Frequently asked questions
How is flip profit calculated?
ARV minus all costs — purchase, rehab, holding, financing, and selling. The remainder is pre-tax profit.
What ROI should I target?
Many flippers want 10–20%+ on invested cash, or a minimum dollar profit (often $25k+) to justify the risk.
What costs get missed?
Holding costs and selling costs — together often 8–15% of ARV.
How do I set my maximum offer?
Use the 70% rule as a fast screen, then confirm with this full cost breakdown.
What's a realistic holding period?
Budget the full time to buy, renovate, list, and close — often 4–8 months. Every extra month is interest, taxes, and insurance.
Is flip profit taxed?
Usually as ordinary income (a dealer activity), not long-term capital gains. This tool shows pre-tax profit; consult a tax professional.