Business Plan for House Flipping: A Step-by-Step Guide

I keep seeing the same thing happen to newer flippers. They find a property with what looks like a big spread, get excited, close on it, and six months later find out the deal barely paid for itself.

The deal itself wasn't the problem. They just never had a plan. Not a vision board, a real plan with every dollar mapped before signing the purchase contract.

That matters more now than it did a few years ago. ATTOM's 2025 year end flipping report put typical gross profit at roughly $65,981 per flip, the thinnest margin since 2008. Flip volume dropped to its lowest level since 2020. When margins shrink like that, the investors still making money are the ones who plan every cost upfront.

Here's how I'd lay out a house flipping business plan, with real numbers.

Start with what kind of flipper you are

Before any spreadsheets, decide what you're building. Quick cosmetic flips turn over faster but come with smaller spreads. Heavy rehabs and full guts carry bigger spreads and a lot more risk. Plenty of investors now run a hybrid, where the fallback is a BRRRR style rental exit if the market softens.

Then get specific about your target property. "Houses in my city" is too loose. Something like "1,500 to 2,400 sq ft single family homes built between 1965 and 2005, ARVs between $250K and $450K, in these three zip codes" gives you criteria you can actually filter deals against.

Set goals you can measure. Most flippers aim for 10 to 20% of ARV as profit. A realistic first year might be 2 flips at $35K to $50K net each. Scaling to 4 to 6 a year by year 3 is ambitious, but doable if your systems and funding keep up.

Get the entity and banking right early

Most new flippers start with a single member LLC. A multi member LLC works better if you have partners. An S Corp election only starts to make sense once profits are high enough for the payroll tax savings to matter. You can do a sole proprietorship for your first deal, but it gives you no liability protection.

Get your EIN and open a separate business bank account from day one. Lenders want to see clean separation between personal and business money, and it makes tax time much easier.

Put everything in writing. Profit splits, decision making authority and capital contributions if you have partners. Scope, price and change order policy for every contractor.

Write down your buy criteria before you look at deals

Your market research decides whether you can buy right, and buying right decides whether you make money.

Write down your maximum purchase price as a percentage of ARV, your minimum spread after rehab, your minimum profit, and the most rehab complexity you're willing to take on at your current skill level. Then stick to it.

For due diligence, you want a written scope of work, a contractor walkthrough, a realistic rehab budget, and comps from the last 90 days within half a mile to a mile. Older or wider comps will inflate your ARV and give you a false sense of margin.

The cost breakdown (where most plans fall apart)

Here's a sample flip: purchase at $210,000, ARV of $320,000. That's a $110K spread on paper. Here's where the money actually goes:

Acquisition (purchase, earnest money, inspections, appraisal, lender fees, title, escrow, transfer taxes): $218,000 to $225,000

Rehab (labor, materials, permits, dumpsters, design items, 15% contingency): $50,000 to $57,500

Holding (about 6 months of hard money interest at 11%, taxes, insurance, utilities, yard care): $10,000 to $14,000

Selling (5 to 6% commissions, staging, photos, seller closing costs): $19,000 to $24,000

Total: roughly $297,000 to $320,000.

That leaves anywhere from breakeven to about $23,000. Six months of work and risk for a margin that one contractor delay or one price cut could wipe out completely.

The 70% rule shows you why. At a $320K ARV with $57,500 in repairs, 70% of ARV minus repairs puts your maximum purchase price around $166,500. Paying $210K meant the margin was gone before demo day. Some investors in competitive markets stretch to 75 or 78%, and that's fine if you know you're doing it and have priced the risk in. Most people who go over the rule never ran the numbers in the first place.

Holding costs are the other one people underestimate. Renovations almost always take longer than planned, and every extra month costs you interest, taxes, insurance and utilities. Build in a buffer.

Figure out your funding gap before you make an offer

This is the part that catches people who have done a flip or two and are ready to scale.

Even with a hard money lender, you still need cash. Take a $250,000 purchase with $50,000 in rehab and a $360,000 ARV. A typical hard money structure might fund 85% of purchase ($212,500) plus 100% of rehab ($50,000), for $262,500 total. That stays under a common cap of around 75% of ARV.

What's left for you to bring:

15% down payment: $37,500
Closing costs: about $7,500
Working capital until the first draw: about $10,000
Reserves: about $5,000

That's roughly $60,000 out of pocket on one deal. Run three at the same time and you need $150K to $180K in working capital. For a lot of investors, cash flow becomes the real limit long before deal flow does.

Your plan should say exactly where that gap money comes from. Personal savings, private money from friends or family, a HELOC on a property you already own, unsecured term loans, 0% business credit cards for contractor and material costs, or a business line of credit. Each one has its own costs and risks, and the order you apply in affects what you get approved for.

One thing I'd flag: be careful with any gap money that wants a second lien on the deal property. Most hard money lenders don't allow it, and a lot of hard money notes get sold after closing. An undisclosed second lien can cause real problems with your lender. At Gap Funded, we structure gap capital so it's either unsecured or secured against something else the investor already owns, and that's the approach I'd push anyone toward, whoever they work with.

Build your team like you'll scale

Even if you're the only name on the LLC, you need an acquisitions process, a project manager (even if that's you for now), a bookkeeper, a general contractor, reliable trades for plumbing, electrical and HVAC, and a good listing agent.

Check contractor licenses, insurance and references, and walk their past jobs before you hire them. Use a standard scope of work template and a simple budget versus actual spreadsheet on every project. Pick your finish packages, paint colors and hardware ahead of time so small decisions don't stall the job.

After your 4th or 5th flip, a dedicated project manager is usually worth it. It frees you to focus on acquisitions, which is where the money gets made.

Plan your exit, and your backup exit

Set a days on market target (under 30 is a good benchmark in most markets) and decide in advance when you'll drop the price and by how much. Start marketing during the rehab so buyers are already interested when it lists.

Always have a plan B: convert to a rental, or sell to another investor at a discount. If the numbers only work on one exit, the deal is riskier than it looks.

Track everything and update the plan

Every project should end with a review. Compare budget with actual, planned days on market with actual, and projected profit with final profit. Use conservative assumptions so your real results beat the plan instead of the other way around. Review the whole business plan every quarter.

A business plan won't guarantee a profit. What it does is make you find the bad deals on paper instead of six months into the rehab.

What's the biggest cost you underestimated on your first flip? I'd love to hear what caught people off guard, especially on holding costs and rehab overruns.