What’s the most commonly underestimated number when analyzing a flip?

Question

When people analyze a fix and flip deal, most of the focus usually goes to the big three numbers: purchase price, rehab cost, and ARV.

But in practice, it seems like a lot of deals change dramatically once you start factoring in the other costs that come with the project.

Things like financing interest, holding costs while the property is under construction, utilities, permits, selling costs, and the time it takes to actually finish and list the property can add up quickly. Even small delays can start eating into the margin.

I’ve seen situations where a deal looked like it had a healthy profit on paper, but after accounting for everything realistically the margin was much tighter than expected.

For those who have done multiple flips, what number do you think newer investors underestimate the most when they run their deal analysis?

Is it holding costs, rehab overruns, financing costs, or something else entirely?

Would be interesting to hear what experienced investors consistently build into their numbers that newer investors tend to overlook.

J Castro · Answer

@Jake Nissan, Great question — and honestly this is where a lot of newer investors get surprised once they start doing real deals.

From a lending perspective, the two numbers we see underestimated the most are time and holding costs — and those two are directly connected.

Most new investors will estimate a project taking 3–4 months, but in reality many flips end up taking 6–8 months once you factor in:

• Permit delays
• Contractor scheduling
• Inspection timelines
• Material backorders
• Buyer financing delays once the property is listed

Every extra month adds:

• Loan interest payments
• Property taxes
• Insurance
• Utilities
• Lawn / maintenance
• HOA (if applicable)

Another cost that gets overlooked often is selling costs. Between agent commissions, closing costs, staging, and potential seller concessions, investors should typically plan for 8–10% of the resale price coming off the top.

The investors who stay consistently profitable usually build in three buffers:

• 10–15% rehab contingency
• 1–2 extra months of holding costs
• Full selling cost assumptions (8–10%)

Deals rarely go exactly according to plan, so conservative numbers are what keep margins safe.

One thing I always tell newer investors is:

A deal that only works on perfect numbers usually isn’t a strong deal.

Curious to hear from others as well — do you think time, rehab overruns, or exit costs cause the biggest surprises on your flips?

Alex Wright · Answer

I'd probably say time and holding costs that get underestimated.

A lot of people plug in rehab numbers and ARV, but assume the project will be done in 3–4 months. In reality, permits, contractor delays, inspections, or material issues can easily stretch that to 6–8 months. Wasn't a flip, but on my personal home, our windows kept getting delayed. Ended up being 6 weeks late and then when they got here, half weren't right and they had to send more.

Every extra month adds interest on financing, utilities, insurance,property taxes, opportunity cost of your capital. Top it off, if the market shifts while you’re holding, your exit price can move too.

The other one I see people miss is transaction costs on the sale. Agent commissions, closing costs, and concessions can easily take 7–10% off the top, which wipes out a lot of the “paper profit” in the initial analysis.

A deal that looks great with a $60k margin can shrink pretty fast once you model a longer timeline and full selling costs.

Jay Hinrichs · Answer

rehab surprises and holding costs.

Jorge Vasquez · Answer

Interested to see what metrics would season investor say helps them the most.

Paul Olusola · Answer

Great point, Jake. I’ve been experimenting with AI tools that run flip analysis including hidden costs like holding, permits, and financing it’s amazing how quickly small delays can change the numbers. Curious what others think about using AI to make these estimates faster.

What’s the most commonly underestimated number when analyzing a flip?

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