How Much Does It Really Cost to Flip a House?

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It actually costs you nothing…

But that’s only if you know how to flip houses with no money using “OPM”…but that’s the subject of another post entirely.

Having said that though, there is money and costs involved when flipping houses – it’s just not your money.

This was a question from a new real estate investor I met at our most recent MeetUp – which we just started doing in our local market. It’s great fun to talk with new real estate investors and really see exactly what’s on their mind, what’s holding them back, the issues they’re having with their first investments – and I always walk away seeing things from a completely different perspective.

Real Estate Investment Association meetings and meetups in general are great ways to not only network and grow your house flipping team. But for me, it gives me some fresh ideas as to what to discuss here on BiggerPockets as well!

So let’s get back to the question…

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How Much Does It Really Cost to Flip a House?

The answer here varies widely based upon the project as well as the price range of properties in your area.

For me, we typically buy houses in the six-figure and under range and sell them for $200,000 – 300,000. Your market may be completely different than this, either up or down.

Also, depending on rehabilitation cost, the cost can vary from thousands of dollars to hundreds of thousands of dollars!

Regardless of what the upfront cost is, the most important number in house flipping is After Repair Value, otherwise known as ARV.

How Much It Costs to Flip a House: Nail the ARV

To get to how much it’s going to cost to flip a house, you first need to know what you can sell the property for when it’s all done. Once you know this all important number, the other costs associated with the house flip will really start to come into focus much better.

The best way to determine ARV is through comparing other houses similar to yours that have sold nearby within the past six months. These types of properties are known as “comps”.

A real estate agent who knows that market can help you with this unless you have access to the MLS system.

You can certainly try to get comps through online services, but since this number is so vitally important, it’s best to enlist the help of a professional. They know the ins and outs of the market far better than you do.

Heck, I’ve been doing this for almost 5 years and I still use real estate agents even in markets I’ve bought and sold dozens of properties!

A couple of important things to keep in mind when determining ARV:

  • Look at houses that have sold not ones that are for sale
  • Whenever possible, find houses that have sold within the last 6 months or even less
  • If your real estate agent runs costs that have no recent sales, this potentially could be a warning sign as it may indicate lack of demand for the type of house you’re about to purchase.
  • Your broker should do this but make sure he or she looks at other properties that have similar lot sizes, kitchens, heating systems, number of bedrooms, number of bathrooms, kitchen updates, etc.

How Much It Costs to Flip a House: Finance Costs

Since you’re flipping this house with very little if not no money of your own, there are financing costs that go along with it every flip.

As a rough estimate as to what your possible finance carrying costs may be, find out from your realtor the average days houses in your area are staying on the market before their souls. This will give you an idea as to how long properties are taking to sell. Your realtor will have many opinions as to why some are telling in a shorter period of time and others in a longer period of time – so listen to their advice.

Taking this a step further, let’s say you got a loan from a private lender of $120,000 at 10% interest. And let’s say from the date of purchase to the date of the actual closing – factoring in time for renovation at four months, time on market is one month an additional one month to close, you can figure out your financing costs fairly easily:

  • 4 months +1 month +1 month = 6 months
  • Annual interest: $120,000 x 10% = $12,000
  • 6 month interest cost = $6000

How Much It Costs to Flip a House: Renovation Costs

The biggest expense in flipping houses is usually the renovation. In our business, we don’t do quick “fix and flips” that got the house flipping industry a big black eye years ago – we do ethical house flipping using the highest quality of work possible, while still maintaining healthy margins.

If you’re just getting into house flipping, I would suggest you do the exact same.

And the best part of this is that you don’t have to do any of the work yourself. Just because you know how to use a circular saw it does not make you a competent renovation expert…

I haven’t picked up a hammer in any of my house flips in the last 2+ years (with one small exception).

So if you are just getting started flipping houses, oftentimes its best to get some professional help by hiring a contractor.

Having a contractor on your team will give you a very good idea before the project starts as to what the renovation will cost. When you start flipping houses on a regular basis, you’ll be able to eyeball very quickly how much everything costs – but to start out, get a contractor.

Many house flippers use a price per square foot to estimate renovation costs. We used to advocate doing this, but since every project is so different, it’s best to get the opinion of a contractor – or even multiple contractors to bid on the work.

How Much It Costs to Flip a House: Realtor’s Fees

Although many house flippers and real estate investors feel they are most qualified to sell their property, I discourage you from doing this.

Although the cost for a real estate agent’s commission is significant (5 – 6% typically) which can cost you $15,000 or more on a $300,000 property, if you have a good real estate agent, this is totally worth it. They will be an integral part to your house flipping team.

They know the market, they are the experts and will be taking all the time selling to show the property while you’re off finding your next deal…or working your day job.

Although you may think you can sell that property faster and save yourself the $15,000, think twice. Suck it up and hire a real estate agent to do the work for you. Just make sure you factor in their commission to your overall profit margins.

How Much It Costs to Flip a House: Carrying Costs

There will be some overhead as you hold onto the property. You still have to pay the electric bill, the gas bill, the lawn mowed, the list goes on. Just some of these carrying costs include:

  • Property taxes
  • Utilities (including electric, gas, water)
  • Insurance

Of course, when you determining your house with costs, the longer you hold onto the property, the hired these costs will be as well.

If you’ve made it this far, leave a comment below. Did I leave any house flipping costs? What do you think? Please leave a comment below and let me know!

Photo: magro_kr

About Author

Mike LaCava

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

30 Comments

  1. Nice article Michael.
    One cost that can show up for us is non-traditional initial buying costs if we purchase the home occupied or at the foreclosure sale.

    With the foreclosure sale there is no guarantee past liens are paid that survive the foreclosure. Back taxes, water, hoa all survive the foreclosure in Colorado. Of the home is occupied then we have to pay for cash for keys (hopefully not an eviction).

    Some great ways to keep costs down are to be a realtor and pick houses that can be finished quickly and sell quickly. Time will eat your money away very quickly.

    • Good points Mark anyone buying at auctions really have to do their diligence and research like you said. . I have only purchased 1 occupied home and it was at an auction. I planned a $10,000-20,000 budget for the unexpected and we got it lower than the MAO.
      At some point we may take the sales in house with a broker but it is another business as you know. I know the whole debate thing whether you should get your license or not and I see both side to it. I just think for me and I have a acquisition partner who has his license as well is not to take our time away from what we do best and that is finding properties and rehabbing them. I just recently changed our approach to the rehab process because my acquisition guy was spending too much time managing that and not getting deals. It is all part of growing and managing.
      Thanks for your input

  2. nice article but
    i disagree on using real estate brokers to sell your flip.
    i’ve only done 2 so far but neither time did my selling agent ever show the house
    the buyers agent shows your house to their client, not the listing agent (your $10000+ agent)
    i use agents to buy, not sell. i use a flat fee real estate broker to list and sell. this saves me many $1000’s. why would i pay an agent to sell my house when all they do is list it on the MLS and wait for calls from buying agents or buyers??? open houses are for window shoppers and other brokers. my flat fee fee agent takes care of the paperwork from any offer and my attorney takes care of the closing. it seems to me, a newbie, that the agents have everyone duped into thinking they are the only ones who can sell your home for your, for a hefty price. agents are completely unnecessary. walk up to a house you want to buy and make an offer, it’s completely free.
    just my 2 cents worth

    • Where you from Danny?
      That is not the case here. We screen our Agents to make sure we know what they are doing in the process of selling and I can tell you we get value for what they do.
      Most important they sell our homes and do a good job at it.
      The market is heating up now so we are seeing homes sell more quickly but when the market is slow they really work their butts off to get you a buyer. I chose to stay on this path until possibly taking it in house.
      AS long as your plan works I see nothing wrong with it so all the best.

    • Danny, I understand why sellers want to save money on the sellers side without an agent, but I always ask how much money are you leaving on the table. Like Michael mentioned a good sellers agent does much more than put it in mls. They will advertise in multiple print and online sources, they do market to their own buyers and do much more. The sellers agent can help the seller know exactly how the house joule be shown, what repairs will help it sell and what design choices to make. Not only that, but a sellers agent will know the best price to list at to get the most money. If you aren’t using a sellers agent you either have to be selling many houses a moth yourself to know the market and trends or the buyers are setting the price not you. I see people say teu saved money and ha multiple offers in a day without using an agent. Well if you had multiple offers in a day then you priced it to low ad probably left more money on te table then you saved on commissions. Likewise if you overprice you risk an aged listing that stagnates and that will cost you thousands as well.

  3. Maria Giordano on

    I flip properties in an incredible real estate market. Houses sell very fast, but I still always use a real estate agent to list my flip properties to get top dollar. I have spent hours vetting my agent until I’ve found the appropriate agent to represent my flips. I list my properties very aggressively for my market. I will get my agent involved from the time I consider purchasing my flip property from a homeowner, through the design stage, to marketing the finished product. My realtor’s team takes professional photos, does an entire marketing campaign including over 300 websites, door knocking, and a minimum of two open houses. Usually I have the property under contract the first week, with multiple offers over asking. I would never even consider messing with their commission. I make my money on what I purchase the flip property for, then I make my money on the quality rehab I do, followed by the great realtor team I have put together. The rehab business is a team effort and when you are doing multiple houses you can’t do it all and your realtor (when you interview correctly and pick the right one) saves you money.

  4. “How to Pick a Winning Realtor for Your Flips” sounds like am article I could use. Especially understanding what questions I should be asking to make sure I am picking the right person to join my team.

  5. okay here’s what i’m saying…
    how many listing agents actually show your house for sale? probably not too many as they are in the business of listing not showing houses. yes they may list on mls, websites and other marketing avenues but they don’t show your house. the buyers will use their own broker unless of course they call the sign and actually get the agent and that agent can be a dual agent. very rare in my opinion, very rare. the typical scenario will be like this: the buyers will have an agent they have been working with and they will call them and asked to be shown the house they are interested in. the buyers agent will call the listing agent and ask for permission to show the house. the buyers will put in an offer, if they like it, and the listing agent will collect whatever commission is due them per the contract. easy peasy. i’m a licensed agent btw. i know how it works. this is not to say that some listing agents don’t do a lot of work for their money but all they HAVE to do is list it and wait. most of you probably don’t remember the days when if you wanted to move, you asked friends, relatives and people in the area what was for sale? to buy a house, all you have to do is ask the owner if they are willing to sell. period. the majority of people never move more than a few miles from their current house. a re broker just facilitates the transaction, they are NOT needed, they just make themselves feel needed. a good re attorney can do all of the work for +-$500, NOT $4000-$10000. the agents make the process convenient for both seller and buyer but are by no means necessary…listing on websites is free, for them as well as me, paper marketing is cheap too. open houses are not for potential buyers, they are for other agents and window shoppers, everyone understands this. save yourself a few thousand dollars and get a flat fee re broker. they do the same work and don’t charge a commission. understand my meaning?

    • Danny-

      You’re right, it’s not necessary, but it’s smart. I’m sure you’ve heard “you get what you pay for.” I feel like you’ve left out a major factor, negotiations with the Buyer’s Agent?? A good Buyer’s Agent will eat most discount agents/Owners for breakfast. They have a fiduciary responsibility to their Clients, and ensuring that their Clients get the best deal possible, preferably at your expense. Also, your listing Agent would have a vested interest in selling YOUR property above others, where a Buyer’s Agent could care less if their Buyers choose your listing.

      To me, using a full service professional (i.e. a licensed Real Estate Agent) is a no-brainer, equally as valuable as using a CPA or Attorney. Could I do my taxes myself? Most likely, but the time & effort it would take me to do a subpar job is not worth the amount I would be “saving.” As Maria mentioned, a good Real Estate Agent will be multi-dimensional, offering insight into your original purchase, your upgrades, and then the specifics on listing. Also, as Mark pointed out, their Market knowledge is invaluable. In my opinion, you haven’t found the right Agent if you feel they’re lacking in worth.

      Michael- great article!

      • Great comments Ray and thank you. I agree and all great points. I spend my time finding deals and not showing houses. If I lose one deal that can make me $50,000 because I am spending time showing my house to some buyer which just isn’t a few minutes out of your day then I would be foolish. Everybody has their views and ways of doing business and I understand what Danny is doing but we differ in our approach.
        Good selling agents have their buyers ready to go and that is worth in itself.

  6. Sharon Vornholt

    Great post Mike!

    I think a lot of folks forget to figure in holding costs and the cost of their money in their numbers (or they don’t do it accurately).

    I especially love the comment you made about not being able to find comps for a particular property. That is indeed a great big red flag. This is the time you need to re-think buying this property. Always buy what is normal, is in demand, and doesn’t have any strange things like a bad layout, bad location or similar thing.

    Sharon

  7. While I definitely find this article, to be helpful for people interested in buying to rehab and flip properties. Has anyone written an in-depth article, regarding the process and general fees, of assigning a contract? There are a lot of “newbies”, who can use more detailed information. Especially when they are just starting out, trying to get their feet wet, and build liquidity in the Real Estate game. If there are any in-depth articles, regarding contract assignments; can someone send me the article link? It would be appreciated. Otherwise, I still appreciate the hard work of the BIGGER POCKETS website, and all of it’s contributors.

  8. This article was beyond helpful. I am new, ! day in and I found your article to be a good starting point. How do you know if you have a good team? Especially a good contractor. It seems that if they aren’t good it will cost you money in the long run. Speaking of team… I need help finding one, along with a mentor. I live in Temecula Ca.

    • Glad it helped Lisa. Check references and ask other investors if they can refer to you. Your team takes time to evolve. Get on the forums and ask specifically for you area. Set up key word alerts for your area. Bigger Pockets is a great way for you to get started.
      All the best

  9. This is a good article, but feel there were somethings missing. First I am a licensed Real Estate Agent in California, I am an affiliate with Coldwell Banker and my office is in Del Mar, Ca. I do both buying and sellers side. I read most of the comments and came across Danny’s comments and I just want to elaborate a little on this. Although not necessary I would strongly recommend the use of a professional Real Estate Agent. On the listing side, we have a fiduciary responsibility to our clients. Meaning we have their best interest in mind and we get TOP dollar for them. How do we know what TOP dollar is? One of the things we do, we do a detail market data analysis, pulling comps, and doing a basic un-official appraisal on the house after doing a basic home inspection. This will give me an idea of how much to list the property for. (I could tell you how much a pool is in a certain areas and how much to charge for a view in another area). It’s in my best interest to get max, my clients get more and I get more.
    Danny keeps saying that the listing agent doesn’t show the house, and that’s where he is wrong. Every Monday morning we have an office meeting (this varies from office) we discuss our new listings, wants and needs. We also schedule caravans, where we preview our new listings to all the agents in the area, not specifically just our office but all the agents in that community. We arrange this on Tuesdays, Wednesdays and Thursdays. During the same days we also go to different establishments where other agents go and we do our pitch. This is almost same as office meetings but strictly for listings and with other agents from different companies. Fridays we door nock and invite the neighbors and community to an open house that weekend, usually Saturday and Sunday. So to say we don’t show the house is a huge mistake, we market and show the hell out of property to sell it fast, usually within the first 14days.
    Extras that vary from agency to agency, with Coldwell Banker, we do an E-blast. An E-blast goes out to all the Real Estate Agents in Coldwell Banker in the area and it’s in a form of an email telling us who just had a listing, the property and description and pictures of the property. In addition we get to publish the listing in a Magazine called the View exclusively with Coldwell Banker and this is not mentioning how we market it on line. We have business relations with Realtor.com, Zillow, Trulia a total of about 600 Websites where the house we list could be seen and searched to include outside of the U.S. Keep in mind we also have to do tons of paper work in any given case, our case files carry from 800 pages upwards of over 1000 pages on just one transaction. Just to give you an idea, in California, our Residential Purchase Contract Agreement is up to 10 Pages now 🙂 and TIME is of the essence. We have to keep track of this darn thing, we have to know by when certain contingencies have to be removed, ie. Home Inspection, Termite, and any other inspection deemed necessary, soils report, etc. Also we have to keep track of money, when Loan contingencies have to be removed, that means appraisals have to be done prior.. so as agents we really do have our work cut off on both ends, buyers side and listing sides and that’s why it was deem lawful and fair of what our commissions should be, we really work hard to earn it. Hopefully Danny can read this..in some states they do have attorneys that deal with all real estate transactions but in other states such as this, even attorneys hire real estate agents here because of the complexity. Hopefully I was able to shed some light on the amount of work we do to earn our commissions. Also in the state of California if you have more than four transactions in any given year whether you buy three and sell two or any other mix that adds up to more than four you are required to have a licensed. Most investors here get the license but still use us to deal with paper work and everything else. It is very common that we team up with investors, find them properties that numbers make sense, they provide the funding, do the flip and we take that and we list it and sell it off for them.

    So what was lacking in this article, is what makes sense what numbers? First everyone wants the ugly duckling in a cul-de-sac that is big time underpriced and just needs a little paint job. People it goes more in depth than that. First my market analysis tells me the last ten years history and determines a median price range in ten years and appreciation rate in those ten years, kind of gives us a way to see how the market has been holding up and trends. Second I do another analysis for the current year only, gives me the median price range or going rate, I pull the highest sold in that year for that area and the lowest sold. By doing this, I get to see my price range, I also determine affordability index, this tells me what people can actually afford to buy in that area ? then I start looking for that ugly duckling that only needs a paint job and after I compare it I can clearly see if the numbers make sense. After this is done, because it looks nice on paper it doesn’t mean it’s the right one, I do a preview of the property. Usually I invite a General Contractor to give me an idea on how much money it will cost for repairs and upgrades. Restrooms 100% re-done, no ifs and or buts, kitchen, we look at layout and determine best use. Paint job for the entire house and new flooring. Outside a good 1% to 2% should be invested here. For Every $100 you spend here you get in return $1,000. So once I know these numbers I go back and figure out if it’s worth buying and flipping or if the price is way above that it should be sold. Anyway just wanted to share this but what do I know? I am just a small agent in Del Mar, CA. hahaha

  10. Paul Vu

    @CARLOS, That is definately a handful of work preformed to ensure a quick transaction for the flip and fair commision due. However, I can understand Danny’s reasoning in the cases where agents have dozens of properties being listed which might influence them to limit the amount of effort between properties. OF course, I would love to believe that all prudent RE agents will do everything in their limits to give 100%. Great article. Learned a lot just reading through the comments.

  11. Alejandro Robaina

    This is my 5 or 6th day here in bigger pockets and since I’m reading step by step and taking ALOT of notes of flipping houses guide I feel more familiar because @Michael explain everything so well. As I’ve mentioned before I’m Hispanic and I still understand everything thank you so much to BP Team

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