Flip profit looks simple from the outside: buy low, renovate, sell high. But the gap between sale price and purchase-plus-rehab gets eaten from three directions at once — selling costs, carrying costs that grow every month, and surprises. Flippers who last are the ones who model all of it before they buy.
Here is the full deal math, piece by piece.
Selling Costs: 6-10% of the Sale Price
When the renovated property sells, expect 6-10% of the sale price to go to transaction costs. The largest piece is the agent commission, typically 5-6% of the sale price, split between the listing agent and the buyer's agent. On top of that come title and escrow fees, transfer taxes, and frequently seller-paid concessions or buyer closing-cost credits — especially common when selling to first-time buyers.
On a $300,000 sale, that's $18,000-$30,000 gone before you touch your profit. New flippers routinely forget this line entirely, which is how a "$40,000 profit" becomes $15,000 at the closing table.
Hold Months and Carrying Costs
Your hold months run from the day you purchase to the day the resale closes — renovation time plus listing, contract, and closing time. Every month on that clock has a price: loan interest (painful on hard money), property taxes, insurance, utilities, and lawn care or snow removal. If carrying the project costs $2,800 a month, a flip that takes nine months instead of six quietly loses another $8,400.
This is why speed matters so much in flipping — not because fast work impresses anyone, but because time is a direct expense. Pad your schedule realistically: permits, contractor availability, and days-on-market in your area are all part of the hold, whether you planned for them or not.
Annualized ROI: Comparing Fast Money to Slow Money
Two flips each return 15% on the cash invested. One took four months; the other took a year. They are not equal — the first lets you redeploy your capital twice more in the same year. Annualized ROI captures this:
Annualized ROI = ROI × 12 ÷ hold months
The four-month flip annualizes to 15% × 12 ÷ 4 = 45%. The twelve-month flip stays at 15%. When comparing candidate projects, annualized ROI is the fairer yardstick, because your real constraint isn't deals — it's how hard each dollar works per year.
Break-Even Sale Price: Your Floor
Before buying, compute the sale price at which your net profit is exactly zero after every cost: purchase, rehab, loan points and interest, all carrying costs for your expected hold, and the full 6-10% of selling costs. That's your break-even sale price.
The gap between your expected sale price (the ARV) and break-even is your entire margin of safety. If comps say $300,000 and break-even is $285,000, a soft market or a slow sale wipes you out. If break-even is $250,000, you can absorb a price cut, an overrun, and two extra months and still walk away whole. The free Shouldirefi Deal Analyzer calculates your estimated break-even price alongside projected profit, so you can see the cushion — not just the upside — before you offer.
Plan B: The Rental Exit
Sometimes the market turns mid-project and the flip won't sell at an acceptable price. The strongest flippers underwrite a plan B before they buy: converting the unsold flip into a rental. The mechanics: place a tenant, then refinance out of the expensive short-term loan into a long-term DSCR loan, which is underwritten on the property's rental income rather than your personal income.
For plan B to be real, check two things at purchase: would market rent cover the long-term mortgage payment with a healthy cushion, and would a refinance at typical LTVs (a share of the appraised value) pay off your hard money in full? A property that works as a flip and pencils as a rental is a deal with two exits. A property that only works if it sells fast at top dollar is a bet, not a plan.
The Whole Equation
Profit = sale price − purchase − rehab − carrying costs for the real hold − selling costs. Run it with honest numbers, know your break-even, judge it on annualized ROI, and keep a rental exit in your back pocket.
All figures are estimates for informational purposes only — not financial advice. Consult a qualified professional before making financial decisions.