House Flipping Deal Example: Costs, Profit, and ROI

Scenario overview: the apparent spread

A fictional renovation opportunity has a $215,000 purchase price, a $65,000 rehab budget, and a $375,000 expected sale price after the planned work. The simple difference between sale price and purchase price is $160,000, which may initially look generous. That number ignores every other project cost.

The acquisition uses a 20% down payment and an illustrative 10% annual financing-cost rate during a six-month holding period. Buying closing costs are 2% of purchase price. Sale costs include 2% of other closing costs and a 6% agent commission.

This is an educational example, not a property, contractor proposal, appraisal, listing, or forecast. The expected sale price is an assumption rather than a guaranteed exit. The calculator uses a simplified financing-cost model and does not represent a specific loan, draw schedule, points, extension fees, or compounding arrangement.

Step 1: Calculate acquisition, rehab, and financing costs

The down payment is $43,000, leaving a modeled loan amount of $172,000. Buying costs are $4,300, calculated from purchase price. The $65,000 rehab budget is then added in full because the calculator assumes it is part of project cost and investor cash, rather than separately financed.

The financing input is not a mortgage amortization. It approximates carrying cost as loan amount times annual rate times the fraction of a year held. A real renovation loan may charge points, lender fees, interest on drawn balances, inspection fees, minimum interest, default rates, or extension fees. Those terms should replace the simplified assumption when available.

The rehab budget also needs more than a total. Scope, quantities, labor, materials, permits, design, contractor overhead, contingency, and payment timing affect execution. Discovering hidden conditions after demolition can change both cost and duration, which is why the sensitivity later tests time separately.

Step 2: Add holding and selling costs

During six months, property tax contributes $1,500.00, insurance contributes $900.00, utilities contribute $2,100.00, and other monthly holding costs contribute $900.00. Together they create $5,400.00 of non-financing holding costs.

Selling costs scale with the assumed exit price in this model. The calculator does not include every possible concession, staging expense, transfer charge, repair credit, title issue, or seller-paid cost. When an actual sales strategy is developed, those items should be entered through supported categories or tracked alongside the model.

Holding costs do not stop when construction is substantially complete. Final inspections, punch-list work, marketing, contract negotiation, buyer diligence, appraisal, financing, and closing can extend the timeline. A schedule should therefore include both construction and disposition, not merely the contractor’s active work period.

Step 3: Calculate total cost, profit, and ROI

Total project cost is $328,300.00, leaving estimated profit of $46,700.00. That is far below the initial $160,000 purchase-to-sale spread because rehab, closing, financing, holding, and selling costs consume part of the difference.

ROI compares modeled profit with the calculator’s cash-invested definition. It is not annualized, and the article does not add an annualized return that the calculator does not support. It also does not account for income taxes or the opportunity cost of capital. A positive estimate remains dependent on the exit price and complete cost execution.

Sensitivity: extend the project from 6 to 9 months

The alternative case changes only the holding period from six months to nine. Purchase price, rehab scope, expected sale price, financing rate, and all monthly or annual cost inputs remain unchanged. The delay therefore increases financing cost, prorated tax and insurance, utilities, and other monthly holding costs without assuming a better sale price.

The delay reduces estimated profit by $7,000.00 and lowers ROI because additional cash is committed while expected sale price remains fixed. The test does not assume the delay also causes a market-price change; that would be a second sensitivity with a different causal question.

Timeline risk can come from permits, inspections, material lead times, contractor capacity, change orders, weather, utility work, buyer financing, or title issues. A credible schedule assigns responsibility and contingency rather than treating the base duration as a guaranteed closing date.

Interpret the estimate and complete project diligence

The base case shows a positive modeled profit after the listed costs, while the delay demonstrates meaningful sensitivity to time. Neither result confirms that the scope is complete or the exit price is achievable. A project with a positive spreadsheet result can still face insufficient contingency, quality problems, financing extensions, sale concessions, or a market change.

Before making a decision, verify title and acquisition charges, inspect the property, define the rehab scope, obtain bids, evaluate contractor qualifications, confirm permits and zoning, price renovation insurance, document financing fees and draw mechanics, and support the expected sale price with relevant evidence. Review the sale plan, commission arrangement, closing costs, and realistic marketing-to-close period.

Cash invested also matters independently of percentage ROI. A project may show an attractive percentage but require more liquidity than the investor can safely commit, especially if draws are reimbursed after work or contingency is used. Conversely, a larger cash position does not repair a weak scope or unsupported exit.

Document a base schedule with milestones for design, permits, demolition, rough work, finishes, inspections, listing, contract, and closing. Assign cost consequences to slippage and update the model when a milestone moves. This makes duration a managed assumption instead of a single optimistic number entered once.

The practical conclusion is conditional: the complete cost stack preserves a positive estimate in both modeled timelines, but three additional months materially reduce profit and ROI. That result identifies schedule control and contingency as important diligence topics; it is not a directive to undertake or reject the project.