How to Calculate Fix and Flip ROI
Quick Answer
The simple formula for fix and flip ROI is: Profit = Sale Price - (Purchase + Rehab + Holding Costs + Closing Costs). Divide profit by total cash invested to get your ROI percentage.
Table of Contents
The Basic ROI Formula
The fundamental formula for calculating fix and flip profit is:
Profit = Sale Price - (Purchase Price + Rehab Costs + Holding Costs + Closing Costs)
To calculate ROI as a percentage:
ROI = Profit / Total Cash Invested x 100
Breaking Down Each Component
Sale Price
The price the renovated property sells for on the open market. This should be estimated conservatively using comparable sales.
Purchase Price
What you paid to acquire the property, including any buyer closing costs.
Rehab Costs
Total renovation expenses including:
- Materials and labor
- Permits and inspections
- Contractor overhead
- Contingency (10-15%)
Holding Costs
Monthly costs accumulated during the project:
- Loan interest payments
- Insurance premiums
- Property taxes
- Utilities
- HOA fees (if applicable)
Closing Costs
Costs on both the buy and sell side:
- Buy side: Origination fees, appraisal, title insurance, attorney fees
- Sell side: Agent commissions (typically 5-6%), transfer taxes, title fees
Example Calculation
| Item | Amount |
|---|---|
| Sale price | $350,000 |
| Purchase price | -$200,000 |
| Rehab costs | -$60,000 |
| Holding costs (6 months) | -$18,000 |
| Buy closing costs | -$8,000 |
| Sell closing costs | -$21,000 |
| Net profit | $43,000 |
Cash invested (down payment + closing): $48,000
ROI = $43,000 / $48,000 = 89.6%
Common Mistakes in ROI Calculations
- Forgetting closing costs on both buy and sell sides
- Underestimating holding costs by assuming a shorter timeline
- Ignoring contingency in the rehab budget
- Using optimistic ARV instead of conservative comparable sales
- Not accounting for agent commissions on the sale
When to Walk Away
A deal may not be worth pursuing if:
- Projected ROI is below 15% after all costs
- The margin of error is too thin (small profit on a large investment)
- Comparable sales are limited or declining
- The rehab scope is uncertain or high-risk
- Holding costs would consume most of the profit on a delayed timeline
Related Reading
Key Takeaways
- ✓Include ALL costs in your ROI calculation
- ✓ROI should be measured against cash invested, not total project cost
- ✓Holding costs and closing costs are commonly underestimated
- ✓A thorough analysis before buying prevents unprofitable deals