Flip Profit: Costs, Returns, and Break-Even Analysis

Reviewed July 20, 2026 · flip-profit@1.0.0

What a flip profit estimate measures

A flip profit estimate compares modeled net sale proceeds with the purchase, renovation, carrying, and financing costs of a property project. Keeping those categories separate makes it easier to see which assumption changes the outcome.

The Flip Profit Calculator produces an educational project scenario. It does not predict a sale price, construction schedule, buyer demand, financing availability, or investment result.

Build the cost stack before calculating profit

Formula version flip-profit@1.0.0 starts with two time- and scope-dependent costs:

• Holding costs = monthly holding costs × holding period in months
• Rehab contingency = rehab budget × contingency rate

It then calculates:

Total project cost = purchase price + purchase closing costs + rehab budget + contingency + holding costs + financing costs

The cost stack deliberately keeps purchase closing costs, planned rehab, contingency, monthly carrying costs, and financing costs visible. A single combined cost estimate can hide an omitted category or make two scenarios difficult to compare.

Holding costs accumulate for every entered month. They may represent modeled utilities, insurance, property taxes, maintenance, security, association charges, or other carrying costs, but the calculator accepts one combined monthly amount. The user must decide which items belong in it and avoid counting the same cost twice.

From sale price to net sale proceeds

The MVP models the agent commission as a percentage of the entered sale price:

Agent commission = sale price × agent commission rate

Other selling closing costs are entered directly. Net sale proceeds are:

Net sale proceeds = sale price − agent commission − selling closing costs

Estimated profit then subtracts the full modeled cost stack:

Estimated profit = net sale proceeds − total project cost

This structure makes the sale-price assumption and sale deductions explicit. It does not validate an after-repair value, forecast market appreciation, or estimate an eventual buyer’s financing.

ROI and annualized ROI

Project ROI compares estimated profit with total modeled project cost:

ROI = estimated profit ÷ total project cost

The denominator includes the purchase price even if debt finances part of the project. This is therefore a return on modeled project cost, not a cash-on-cash return on investor equity.

The annualized result is:

Annualized ROI = (1 + ROI)^(12 ÷ holding months) − 1

Annualization converts the entered holding-period result to a compounded 12-month equivalent. It does not assume the project can be repeated, predict annual income, or account for time between projects. If the modeled loss is greater than 100%, the annualized expression is not a real number and the calculator shows it as unavailable.

Worked example

The default six-month example uses:

• Purchase price: $200,000
• Purchase closing costs: $6,000
• Rehab budget: $50,000
• Rehab contingency: 10.00%
• Monthly holding costs: $1,500
• Financing costs: $5,000
• Sale price: $350,000
• Agent commission: 6.00%
• Other selling closing costs: $7,000
• Target profit: $40,000

Six months of holding costs equal $1,500 × 6 = $9,000. The rehab contingency is $50,000 × 10% = $5,000. Total project cost is therefore:

$200,000 + $6,000 + $50,000 + $5,000 + $9,000 + $5,000 = $275,000

The modeled agent commission is $350,000 × 6% = $21,000, so net sale proceeds are:

$350,000 − $21,000 − $7,000 = $322,000

Estimated profit is $322,000 − $275,000 = $47,000. Project ROI is $47,000 ÷ $275,000 = 17.09%. Annualizing that six-month modeled result produces 37.10%, which is a mathematical equivalent rather than a forecast.

Break-even sale price

The break-even sale price accounts for percentage commission as well as fixed selling costs:

Break-even sale price = (total project cost + selling closing costs) ÷ (1 − agent commission rate)

For the example:

($275,000 + $7,000) ÷ (1 − 6%) = $300,000

At that modeled sale price, commission and the fixed selling costs leave net proceeds equal to the $275,000 total project cost. The break-even result changes when purchase cost, rehab, time, financing, closing costs, or commission changes.

Maximum allowable offer

The calculator also backs a user-entered target profit out of the scenario:

Maximum allowable offer = sale price − commission − selling closing costs − rehab − contingency − holding costs − financing costs − purchase closing costs − target profit

The example’s $40,000 target produces a $207,000 maximum allowable offer. This is an arithmetic purchase-price allowance under the entered assumptions. It is not an appraisal, bid recommendation, market value, or assurance that the target profit is achievable.

A negative result means the selected sale price, non-purchase costs, and target profit leave no positive purchase-price allowance.

Test sale-price sensitivity

The sensitivity table reruns the complete formula at sale prices 10% and 5% below the entered value, the entered value itself, and prices 5% and 10% above it. Each row recalculates commission, net proceeds, estimated profit, ROI, and annualized ROI.

The rows are scenarios, not probabilities. A credible review should also test rehab overruns and schedule delays because those risks affect contingency and holding costs rather than sale price alone.

What the estimate does not include

The baseline does not determine or model:

• Whether the entered purchase or sale price is supported by market evidence
• Detailed construction scope, contractor performance, permits, or change orders
• Itemized carrying costs or changing costs over time
• Financing draw schedules, interest accrual mechanics, or lender conditions
• Buyer concessions or sale deductions not entered in the two selling-cost fields
• Income taxes, depreciation, entity structure, or individual tax treatment
• Opportunity cost, concurrent projects, or time between projects
• Legal requirements, title conditions, environmental issues, or property defects

Use the Mortgage Payment guide for a fixed loan-payment schedule, the Cash-on-Cash Return guide for a financing-aware rental return denominator, or the Cap Rate guide for property-level income yield. Those metrics answer different questions and should not be treated as substitutes for project profit.

Reviewing a flip scenario

1. Verify the purchase, rehab, and sale assumptions from current evidence.
2. Separate planned rehab from contingency and confirm neither is omitted.
3. Make the holding period long enough to include acquisition, work, marketing, and closing.
4. Include carrying, financing, purchase closing, and selling costs once each.
5. Treat the target profit as an editable assumption, not a market rule.
6. Stress-test both sale price and project duration.
7. Compare the calculation with qualified construction, financing, tax, legal, and property-specific review.

A modeled profit is an educational estimate, not a forecast, appraisal, offer recommendation, or assurance of investment performance.