The Silent Killer of of Your Flipping Business…

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Riddle me this…

I am your best friend and also your worst enemy, who am I?

Give up?

I am Time.

When is time our enemy?  Well, almost always if you are a flipper.  The name of the game really is, quick in, and quick out.  The faster we sell, the less holding costs we pay. The less holding costs, the more profit we put in our pocket.  If a survey was done, my guess is that most investors would agree that the number one sucker of profits is our holding costs.  They can be so subtle that we do not even know it is happening until after we close the deal.  That is why they can be the silent killers.

What Are These Silent Profit Killers?

  • Interest
  • Taxes
  • Insurance
  • Utilities
  • Maintenance
  • The cost of having to pass on a great deal because your money is tied up on one already.

What causes these expenses to run up so high so quickly?  Well for one, they NEVER stop.  Did I mention, they NEVER stop yet?  How about now?  They NEVER EVER STOP until the house is sold.  The lender could care less if you are sick, or your contractor doesn’t show up, or if the dog ate your homework.  They get their interest day in and day out irregardless.

The same is true for the local tax collectors.  You pay taxes for the exact number of days you own a property. Same with your insurance company. If you want power on your home, which is a requirement, that also adds up day after day, minute after minute. You want heat in the winter months? Same deal.  Of course you could ignore it and let your pipes freeze, that is always a fun day in the great Northeast.  Maintenance?  Well, you could ignore it, but you WILL pay in the end.

If you don’t mow the lawn, your house will look lousy and probably take much longer to sell.  Plus the local towns will fine you if it gets out of control, so in the end it WILL cost you.  If you are tied up in a property and have been for 6 months longer than expected, and a killer deal comes along but you are tapped, how much does that cost you??  It is tough to put a figure on that one but we will discuss it later.

One of the Best Details I Decided to Visually Track

Those of you who know me, know that I am NOT a detail person. I am much more of a big picture thinker and a visual person.  However, I have learned that paying attention to this one detail has changed my life.  So if you are like me and do not like the details, I get it.  BUT, take the time to learn and apply this one and your life will change.

Every day costs you money as a flipper.  The sooner you get that drilled into your head, the better of an investor you will be.  We usually have about 15-18 projects going at any one time, all in different phases.  Each of them is accruing these silent killer holding costs.  There have been times when we let a house sit for a month or two prior to starting construction, thinking we were waiting for the right contractor, or the right time, etc.  What a colossal mistake!!  We decided last year to start to really watch those holding costs, VISUALLY.

We have white boards in our office, one for each property we currently own.  Each week prior to our Monday staff meeting, we update a very important number in RED with a minus sign in front if it.  It is the current accumulated holding costs on that particular property.

Wow, what an eye opener!

Even if you only have one deal going on, I would strongly recommend doing this exercise.  Staring at that growing number right out in the open will help you make much better decisions.

Remember Those Math Word Problems in High School?

Stay with me and save this post, it will be your best friend in the future.

Assume you are flipping a house and you have borrowed $100K for the project from a private lender.

Add the following:

  • Annual Interest on money if you were to hold the property for one year
  • Annual Property Taxes

Multiply each of these monthly figures by 12 to get an annual figure.

  • Monthly Insurance Costs
  • Average Utilities (higher during construction)
  • Monthly Maintenance

Add these annual totals to the Interest and Tax figures from above.

You will now have your approximate annual holding costs.  Let’s break it down to your daily holding costs on a property.  If you borrowed $100,000 at 12% on a house with taxes of $4000 (welcome to New York State!) It might look like this:

$100,000 at 12% = $12,000 interest

$12,000 interest + $4000 taxes + $1800 insurance + $1800 Utilities + $1200 Maintenance = $20,800 / 365 = $56.99 per day.  lets call it $57 per day to make the math easier.

Sounds like not much, huh?  WRONG!  In a 30 day month, your silent costs are at least $1709.59 each and every month.

Think that will eat into your profits?

You hold a house for 6 months you pay $10,258.  Something goes wrong and you hold that same house for 12 months, guess what? You now spent $20,515 just for the privilege of holding your house.

Knowledge is Potential Power, Only If You Apply It!

Use this information to help you make better decisions on your projects.  Next time a contractor is not on the job when promised, know that it is costing you about $57 that day.  If he disappears for a week…well, you do the math.  When a closing is taking weeks longer than necessary, who is footing the bill?  You are!  So push to get the closings done much quicker.

It is also very helpful to make good decisions on who to hire.  You get two quotes to clean up the yard in preparation for getting your flip on the market.  One is $1000 and can start that afternoon and be done in 2 days.  The other is $700 and can start in 8 days and be done in 3 days.

At first glance, the $700 is much cheaper, right?…Wrong!  The $1000 quote will allow you to have your home on the market in 2 days.  The $700 quote will allow your home to be on the market in 11 days.  The $1000 guy gets you on the market a full 9 days earlier.  If we go back to our earlier example of $57 per day, you will see that the true cost of the $700 quote is actually $700 + $513 ($57 daily costs x 9 extra days) for a total of $1213.  Most people, including me at times, think that they are saving $300 in that example by going with the “cheaper” guy, when in reality, they lost $213!  Amazing, isn’t it?  Imagine how those numbers play out on bigger projects, scary!

Learn to calculate ALL the expenses on your next flip! Check out the new BiggerPockets Fix and Flip Analysis and Reporting Tool. Try it out for free today!

Let’s look at one more important silent killer of profits. Let’s assume you have a limited pool from which to invest.  Let’s say it’s $100K, the only way to make a great return on the same money over and over is to do more houses in the same time frame.  If you usually do 2 house a year, imagine what the return would be if you could trim a couple months off each deal with better decisions and systems.  If you did that and could now flip 3 houses a year with the same money, would that dramatically increase your bottom line?  Now you see why the daily holding costs we figured above is MUCH MORE as you are not able to do as many deals.

Count ALL the Costs

So next time you are making a decision, look at ALL of the numbers, not just the ones on the surface.

The truly successful investors know that time is the enemy and the only way to make her your friend is to use less of her!  I think if a bill arrived every day in our mailbox for $57 and a new bill arrived DAY AFTER DAY until the house was sold, it would push us all to move a little faster.  Better yet, imagine if a Mob guy showed up every morning and said in a gruff NY accent, PAY ME!  You think we would al move a little quicker?

I know I would!

We should all think of it like this, because even though no one is pressing us daily for the holding costs, there is always a time to pay the fiddler, and the costs are the same rather you pay daily or at the end of a project.  Bottom line, trim holding time, add more profit to your pocket and end up with Bigger Pockets!  What a smooth plug for Josh and Brandon! 🙂

Hey, if you are a buy and hold investor, use this for when your property sits vacant.  How much does it cost you to sit each day unrented?  How much does it cost you every day you put off starting an eviction while your tenant strings you along?  You won’t like the numbers you see!!  Time is not always your friend either!

Sorry for the confusing math lesson today, I sure hope you were all able to follow along with my logic.  I would love to hear your comments.  Have an awesome week!

Photo: Daniel Y. Go

About Author

Glenn Schworm

Glenn and his wife Amber are the owners of Signature Home Buyers , located in upstate New York. They have bought and sold over 100 houses and counting since beginning in 2008. They are also the proud parents of 3 amazing kids and love to travel the globe, scuba dive, skydive and basically live life to the fullest!


  1. Brandon Turner

    Awesome post Glenn! Definitely my favorite you’ve ever written. This stuff is so important for new people, and this article is one that I wish I had read (multiple times) before flipping my first few deals. Thanks for sharing this! This will be one that I refer people back to often!

    • Glenn Schworm

      Wow, your favorite?? Nice! Thanks Brandon. It took us losing a ton on this to learn the lesson, but I always say, the lessons learned the hard way are sometimes the best learned lessons. Thanks again, it was fun to write.

    • Glenn Schworm

      Wow Doug, thanks for that! The passion has come from losing a ton of money from those darn holding costs. Once you learn that part and treat it with the same urgency of pumping out a leaking basement, you will do much better. It is so easy to put it off and forget about it. Thanks again.

  2. Glen,

    You forgot the caution that too much exposure to this silent killer might bring on the other “silent killer” … at least that seems to be my wife’s worry … I have an app on my desktop that shows the vacancy costs … and, for the past month, I have had four units vacant (that’s 1/3 for me) … they are vacant by design for renovation: two of them will be filled in August and the other two for September … yet seeing the $134.17/day of lost revenue every morning motivates me to push the suppliers and sub-trades

    • Glenn Schworm


      Totally agree. There are so many more potential dangers that can happen because of longer holding times. We have had copper pipes stolen, frozen pipes (twice in the same house!), animals moving in, pools breaking, mold growing out of control and so much more. The longer we hold them, the more chance these things happen which also all cost money. You’re right I should have included that in the article but I felt it was getting too long already! Thanks for the reminder Roy.


  3. I love, love this post Glenn. I’m in love with my whiteboard and now I am in love with yours!

    Your system of using one whiteboard for each property is probably one of the simplest and best ways of staying on top of enemy #1 for a rehabber; costs that eat away at your profit.

    I’m probably going to share this one with my readers on my blog.

    Great post.

    • Glenn Schworm

      Thanks Sharon,

      It was an eye opening exercise and one that I will teach regularly. There is something about having to add to that number every monday that really pushes you! I’m glad you lie the idea, hope it helps!

      – Glenn

  4. Mark Ferguson

    Great Post!
    One of the biggest mistakes I see flippers make is pricing too high and not reducing the price in a timely manner to get it sold. In our market now, it is not quite as important as it is in a declining market, but you never know when it will change. There is also the stigma a property gets when it has been on the market for an extended period of time. Buyers start to wonder what is wrong with it.

    If flippers broke the daily cost down like you have, I bet they would realize a lot quicker how important time is, over a slightly higher selling price.

    • Glenn Schworm


      So very true. We have a 2 week policy, if we are not getting showings, we drop by $10K until we get showings. We know that as soon as they walk through it is a matter of time before we find the buyer. We find the $5K drop is like the Chinese Water Drip Torture. When you realize how much time really costs it motivates you differently.

      Thanks for the comment Mark.


  5. Glen,
    you chose a great topic to write about! Looking at the bigger picture is fine as long as you make sure to glance at the details. Your post is of value to both the new investor as well as the experienced ones, as details do matter! I especially liked the knowledge is power part and the example you gave, so many people trip over dollars to save nickels.
    Nice job!

    • Glenn Schworm


      Yes the details do matter. I am not a fan but they drive our business so I had to embrace them. Had I learned this lesson earlier on I would have been further ahead today, but life is a process! I like to say Knowledge is POTENTIAL Power, because if you learn but don’t apply, it is useless! I know I too have been guilty of jumping over the dollars to save the pennies. Hopefully this example will help a lot of people not to make the same mistakes I did. Thanks for the comment Anthony.

      – Glenn

  6. Jason Varney on

    Awesome article Greg! On the first flip I ever attempted I went in on it with my dad. He put up the money and I did all the work and we split 50/50. Because we didnt have a mortgage, I didnt really pressure myself to rush and get things done… It took awhile to get on the market and then wasnt selling and boy were those costs adding up. Being a newb i just thought, hey no mortgage, no problem dealing with holding costs. Rookie mistake. There are so many you have to factor in and they add up quick!

  7. Bill Briscoe on

    Good reminder, but do you have any good tips for how to get your flip flipped quicker?

    I’m on day 2 of my first rehab, and it already seems to be dragging in places. Although I did get the AC replaced aready, but I forgot my sawzall last night and only got about 20% of the siding demo work done that I needed.

    Anyway, time to get off the web and get to it!

    • Glenn Schworm


      Work quicker! LOL, You will never be done as fast as you would like. There is always unforeseen issues, understand that and your stress level will go down. We will ALWAYS have carrying costs, so the question is, how little can you make them. Work diligently, make quick decisions, and get it on the market asap. If you have no showings, you’re priced too high, don’t be greedy, because the market could care less what you “need” to make. It will pay only what it is worth to the buyers, understand and accept that and you will run much smoother. If you hold out for a larger number, you might get it, but with the extra carrying costs you will probably net the same, so get out sooner and pocket the same amount of cash. Hope that helps!


  8. Great post Glenn. I know exactly how you feel. I am dealing with some growing pains and finding more qualified competitive contractors because even though one of my contractors has added 4 guys to his crew he still can not keep up with our demand on rehab. I recently had a house sit for 4 weeks before starting it. That just kills me. We are working to improve that because I do understand those costs and want to avoid them. How many contractor do you have. Are you using general contractors? That is amazing you have 15-18 properties going on at the same time. You must be killing it. Great job!

    • Glenn Schworm

      Hey Michael,

      We used to do all the GC’ing ourselves but it became so hard that we had to make changes. Now we use GC’s for 90% of the job. We have about 6 different crews. Finding them is the hardest part of our business. We have our PM interview on a regular basis so we are never without contractors to call. When you are relying on one, it is no good as they can’t keep up and if they know they are all you have, they have you over the barrel, and they know it! Thanks for the props, we have done about 28 deals so far in 2013, on track for about 60+. Goal is 100+ in 2014. It is a combination of wholesales and reno’s. About 60/40. It take s a lot but having the systems and people in place is the absolute most important IF you want to have a life and not lose your mind! We are still figuring things out every day. Thanks again for the props. Have a great weekend.

    • Glenn Schworm

      You’re welcome Bill, I am glad you enjoyed it. Leaning this and being keenly aware will make you really pay attention and get rid of the house much quicker. You always hear people say, “time is money” but it is just never that true until you are flipping, it will make or break your deal.

  9. Bryon Johnson

    I am so thankful to have read Mark Ferguson’s article “How to Make and Save More Money – Faster and Easier – in a Seller’s Market”, because it lead me to this amazing nugget of information. Thank you Glenn Schworm for this valuable information!

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