How to calculate fix and flip profit

The short answer

Fix and flip profit is the sale price minus everything you spent to buy, fix, carry, finance, and sell the house. Written as one line: profit = after-repair value − purchase price − buying costs − rehab − contingency − holding costs − financing costs − selling costs. Taxes come out after that.

That sounds obvious, but most flip math that goes wrong goes wrong because a line was left out, not because the arithmetic was hard. Holding costs get counted for the construction months and not the listing months. Interest gets counted on the purchase loan but not on the rehab draws. Selling costs get rounded to a commission and nothing else. This guide walks through every line, shows a worked example with made-up numbers, and then shows how the same deal looks when the rehab runs long.

If you want to skip to the arithmetic, the fix and flip calculator on this site takes the same lines and does the subtraction. The point of this page is to explain what goes into each input so the result means something.

Gross profit is not profit

You will see national flipping numbers quoted as if they were profit. Read the methodology first. ATTOM's home flipping report for the second quarter of 2026 put the typical gross flipping profit at $60,526 and the typical gross return at 21.5% of the purchase price. ATTOM defines gross flipping profit as the difference between the purchase price and the resale price, not including rehab costs and other expenses, and its report notes that flipping veterans estimate those costs typically run between 20% and 33% of the after-repair value. (Source: ATTOM, "Home Flipping Profits Continue Gradual Two-Year Decline," attomdata.com, October 2026.)

So a gross spread is the starting point, not the answer. A house bought for one price and sold for a higher one can still lose money once the rehab, the loan, the months of carrying, and the selling costs are paid. The same ATTOM report put the typical time from purchase to resale at 161 days in that quarter, which is more than five months of taxes, insurance, utilities, and interest on a typical flip.

The rest of this guide is about turning a gross spread into a net number you can plan around.

Line 1: after-repair value

After-repair value, or ARV, is the price you expect the house to sell for once the planned work is done. It is the top line, and every error in it flows straight into profit dollar for dollar. A $10,000 optimistic ARV is a $10,000 optimistic profit.

ARV should come from closed sales of similar houses in similar renovated condition, close by and recent, adjusted for differences in size, bedrooms, bathrooms, garage, lot, and location. Active listings tell you what sellers are asking; closed sales tell you what buyers paid. The guide on how to pull comps and estimate ARV goes through that process step by step. The ARV calculator on this site multiplies square feet by a price per square foot you choose; it does not look up sales for you.

Use the ARV you would bet on, not the best sale on the street. If your comps support a range, plan on the middle or the low end and treat anything above it as upside.

Line 2: purchase price and buying costs

The purchase price is the contract price, but the cost to acquire the house is higher. Buyer-side closing costs usually include title insurance, escrow or settlement fees, attorney fees in states that use them, recording fees, and, in some states and cities, a transfer tax paid by the buyer. If you bought through a wholesaler, the assignment fee is part of your acquisition cost even if it is listed separately on the settlement statement.

Some lenders also charge fees at closing that are really financing costs, such as an origination fee or an appraisal. Count each fee once. This guide keeps lender charges in the financing line so the acquisition line is only the cost of getting title to the house.

Get a fee estimate from your title company or closing attorney for the specific county. Closing costs vary widely by state, by price, and by who pays what under local custom, so a percent you read online is a placeholder at best.

Line 3: rehab budget

The rehab budget is the cost of the work that turns the house into the house your ARV describes. Build it from a scope of work: each room and system, what will be done, and a price for it. Roof, HVAC, electrical, plumbing, windows, foundation, and permits are the big-ticket lines that wreck budgets when they are missed. Cosmetic work such as paint, flooring, lights, and fixtures is easier to price but adds up quickly.

A price per square foot is useful for a first look before you have walked the house. The rehab cost estimator on this site multiplies square feet by a cost per square foot you type. Once you are serious about a property, replace that rough figure with contractor bids for the actual scope. The guide on how to estimate rehab costs covers the difference between the two.

Include permit fees, dumpsters, debris haul-off, and the cost of materials price increases if the job will take months. If you are doing work yourself, decide whether to price your labor. Leaving it out makes the deal look better and makes it harder to compare with a deal you hire out.

Line 4: contingency

Contingency is money set aside for what you cannot see before you open the walls: rot under a tub, knob-and-tube wiring, a cracked drain line, a code requirement the inspector raises halfway through. It is a separate line from the rehab budget on purpose. If you bury it inside the rehab number, it tends to get spent on upgrades instead of surprises.

Many investors pick a contingency as a percent of the rehab budget and raise it for older houses, bigger scopes, or work they have not done before. There is no correct percent. What matters is that the deal still works if you spend all of it, and that you know what happens if you spend more than all of it. The worked example below shows that case.

Line 5: holding costs

Holding costs are the monthly bills you pay while you own the house: property tax, insurance (often a vacant or builder's risk policy, which can cost more than a standard homeowner's policy), utilities, HOA dues, lawn care or snow removal, and security if the house will sit empty. Multiply the monthly total by the number of months from closing to the day the sale closes, not the day you list.

That last point is the one that gets missed. A flip that takes three months to renovate can take another month or two to sell and another month to close. If you only count the construction months, your holding cost is short by a third or more. The guide on flip holding costs shows how the lines add up.

Property tax deserves a second look. Some counties reassess after a sale, and the tax bill on your settlement statement may reflect the previous owner's assessment, not the one you will pay.

Line 6: financing costs

If you borrow, the cost of the money is a project cost. Hard money and private loans for flips commonly charge points up front (a percent of the loan amount), lender fees for underwriting, documents, and draw inspections, and interest that is often interest-only. Some loans also charge an extension fee if you run past the term, and some calculate interest on the full loan amount even before the rehab money is drawn.

Interest is the line that grows when a project runs long. Every extra month of construction or listing adds a month of interest on top of the holding costs. The hard money loan calculator on this site shows monthly interest, points, and total interest from a loan amount, rate, points, and term you type. The guide on hard money points and interest explains how those pieces combine.

If you pay cash, there is still a cost: the return that money could have earned elsewhere. You do not have to put that in the profit line, but you should keep it in mind when you compare a cash flip with a financed one. If the seller is willing to carry a note instead of a bank, the seller financing calculator shows the payment and the balloon.

Line 7: selling costs

Selling costs are what you pay to turn the finished house into cash. They usually include agent commissions if you list with an agent, the seller's share of title and settlement fees, transfer tax in places where the seller pays it, staging, listing photos, a pre-listing inspection or repairs from the buyer's inspection, a home warranty if you offer one, and any concessions or closing-cost credits you give the buyer.

Commissions are negotiable and are not set by law. Since the National Association of Realtors settlement that took effect in August 2024, how buyer-agent compensation is offered and agreed has changed, so ask your listing agent in writing what you will pay to whom. (Source: National Association of Realtors, "Settlement FAQs," nar.realtor.)

Concessions are easy to forget because they do not show up until a buyer asks for them. If buyers in your price range commonly ask for help with closing costs or repairs after inspection, budget for it.

Line 8: taxes

Tax is not a line in most flip calculators, including the one on this site, because it depends on facts about you rather than the house. It still comes out of what you keep, so estimate it.

For a taxpayer who holds a property as an investment, the IRS treats a gain on property held one year or less as a short-term capital gain, which is taxed at ordinary income rates. Gains on property held more than one year can qualify for lower long-term rates. (Source: IRS Topic No. 409, Capital Gains and Losses, irs.gov.) Most flips are held well under a year.

If you flip regularly as a business, the IRS may treat you as a dealer. A dealer's houses are inventory, so the profit is ordinary business income and is generally subject to self-employment tax as well as income tax, no matter how long the house was held. Whether you are a dealer depends on facts such as how often you buy and sell, how much work you do on the properties, and whether flipping is your business. That is a question for a CPA or tax attorney, not for a calculator. The 12.4% Social Security part applies only up to the 2026 wage base of $184,500, counting wages too; the 2.9% Medicare part has no cap, and a 0.9% additional Medicare tax can apply at higher incomes.

Some costs that feel like expenses, such as the rehab, are usually added to your basis in the property rather than deducted separately. Keep every receipt and settlement statement so your tax preparer can sort them correctly.

Example

Illustrative example. Every number here is made up so the arithmetic is visible. It is not a house RE Underwrite Lab bought, financed, or sold, and the percents are placeholders, not market rates. The plan: buy for $210,000, spend $48,000 on rehab, hold for six months, and sell for an ARV of $340,000.

Acquisition: purchase price $210,000 plus buyer closing costs of $4,200 (a placeholder 2% of the price). Rehab: $48,000 from a line-item scope, plus a contingency of $4,800 (10% of the rehab). Holding: $250 a month of property tax, $150 of insurance, and $200 of utilities is $600 a month, or $3,600 over six months.

Financing: a lender funds 90% of the purchase ($189,000) and all $48,000 of the rehab, a loan of $237,000. At 11% interest-only, six months of interest on the full balance is $13,035, because 237,000 × 0.11 ÷ 12 × 6 = 13,035. Two points are $4,740 and lender fees are $1,500, so financing costs total $19,275. This example charges interest on the full balance from day one to keep it simple; a loan that charges interest only on drawn rehab funds would cost less.

Selling: a placeholder 5% commission on $340,000 is $17,000, seller closing costs of 1.5% are $5,100, and the buyer asks for $3,000 in concessions. Selling costs total $25,100.

Add it up: $210,000 + $4,200 + $48,000 + $4,800 + $3,600 + $19,275 + $25,100 = $314,975 of total cost. Profit before tax is $340,000 − $314,975 = $25,025. The gross spread between purchase and sale was $130,000; the net is less than a fifth of that.

Cash in the deal: the 10% down payment ($21,000), buyer closing costs ($4,200), the contingency the lender does not fund ($4,800), holding costs ($3,600), points and fees ($6,240), and monthly interest paid out of pocket ($13,035) total $52,875. Profit of $25,025 on $52,875 of cash is about a 47% return on cash over six months, and about 7.4% of the sale price.

Tax: if this were a short-term capital gain taxed at a 24% marginal rate, federal income tax would be about $6,006, leaving about $19,019. If the IRS treated the seller as a dealer, the profit would be ordinary business income and self-employment tax of roughly $3,536 would also apply (25,025 × 0.9235 × 0.153). Half of that, about $1,768, is deductible for income tax, so income tax at 24% would be about $5,582, for a federal total of about $9,118, leaving about $15,907. Other deductions and limits can change these numbers, and state tax is not included. These figures only show the shape of the calculation, not your tax. The result depends on your situation, so see a CPA or tax professional before relying on any tax figure.

Second example: the same deal when it runs long

Illustrative example. Same made-up house. This time the rehab comes in 15% over budget, $7,200 more instead of $48,000. The $4,800 contingency covers most of that, leaving $2,400 that comes straight out of profit. The job also runs three months late, so the house is held for nine months instead of six.

Three more months of holding costs is $1,800. Three more months of interest on $237,000 at 11% is $6,517.50. Profit before tax falls from $25,025 to $14,307.50, because 25,025 − 2,400 − 1,800 − 6,517.50 = 14,307.50. The overrun itself was only $2,400 after the contingency. The time cost more than twice that.

That is the lesson most flip post-mortems teach: schedule risk is cost risk. A deal that only works if the rehab and the sale both happen on time is a thin deal.

How this compares with the 70% rule

The 70% rule is a quick screen: the most you would pay is 70% of ARV minus repairs. In the example, 70% of $340,000 is $238,000, minus $48,000 of rehab is $190,000. The example bought at $210,000, above that line, and still showed a modest profit on paper, which then shrank when the job ran long.

A rule of thumb is not wrong because a deal outside it made money, and it is not right because a deal inside it lost money. It is a fast way to decide which deals deserve the full line-by-line math on this page. The guide on the 70% rule for flipping houses covers where the rule fails.

Ways to measure the result

Net profit in dollars is the number you live on, but it does not tell you whether the deal was worth the risk. Three other measures help.

Profit as a percent of ARV tells you how much cushion there is if the sale price comes in low. In the example, a 7.4% margin means a sale price about 7.4% under plan wipes out the profit. Return on cash invested tells you how hard your own money worked. Annualized return adjusts for time, so a six-month flip and a twelve-month flip with the same profit are not treated as equal.

Some investors also set a minimum dollar profit per deal regardless of percents, because a small flip can have a good percent and still not pay for the time and risk. Decide your minimums before you look at a specific house so the numbers on a deal you like do not move your standards.

Common pitfalls

Counting holding costs and interest only for the construction months. The clock runs from the day you close on the purchase to the day the sale closes, including listing time and the buyer's escrow.

Using the asking price of the nicest listing on the block as ARV, then calling the result profit. Closed, renovated, nearby sales set ARV; listings are what sellers hope for.

Folding contingency into the rehab budget, so it gets spent on upgrades, then treating the profit as if no surprise could happen.

Leaving out concessions, staging, and the seller's closing costs, then rounding selling costs to a commission alone.

Treating tax as something to sort out later. On a short hold, the tax can take a large share of a thin profit, and dealer status can add self-employment tax on top.

Sources

ATTOM, "Home Flipping Profits Continue Gradual Two-Year Decline" (Q2 2026 U.S. Home Flipping Report), attomdata.com. Gross flipping profit, gross return, and days to resell, with ATTOM's definition of gross profit.

Internal Revenue Service, Topic No. 409, Capital Gains and Losses, irs.gov. Short-term versus long-term holding periods.

National Association of Realtors, Settlement FAQs, nar.realtor. Commission practice changes effective August 2024.

Social Security Administration, Social Security Handbook section 1214, ssa.gov, and 26 CFR 1.1402(a)-6. A real estate dealer's profit from selling real estate counts as self-employment earnings.

Internal Revenue Service, Topic No. 554, Self-Employment Tax, irs.gov. The 15.3% self-employment tax rate, the 92.35% net-earnings factor, and the deduction for half of self-employment tax used in the example.

Social Security Administration, 2026 Social Security Changes fact sheet, ssa.gov. The 2026 maximum taxable earnings of $184,500.

Steps

1. Set the after-repair value

   Start from a resale price you can defend with closed, renovated comparable sales. Every other line is subtracted from this number.

2. Add the acquisition costs

   Purchase price plus the buyer-side closing costs: title, escrow or attorney fees, recording, and any transfer tax your state puts on the buyer.

3. Add the rehab and a contingency

   Use a line-item scope, not a guess per square foot, and add a separate contingency for what the walls hide.

4. Add holding costs

   Property tax, insurance, utilities, HOA dues, lawn care, and security for every month from closing to resale, not just the construction months.

5. Add financing costs

   Points, lender fees, and interest for the months the loan is outstanding. Draw schedules and extension fees belong here too.

6. Add selling costs

   Agent commissions you expect to pay, seller closing costs, transfer tax if it falls on the seller, staging, and any concessions to the buyer.

7. Subtract and then estimate tax

   Profit before tax is ARV minus every cost above. Tax depends on how long you held the house and whether the IRS treats you as a dealer, so estimate it with a tax professional.

Questions