How to Read Your House Flipping Calculator Results
- Closing Costs: If you’re not sure about how much your closing costs are, the average ranges from 2 percent to 5 percent of the purchase price.
- Average ROI on Flipping a House: Fifteen percent is the average and anything above that is typically considered good.
- Next Steps After Using the Fix and Flip Calculator: After using the fix and flip calculator, you should have all of the information you need to make a decision on your project.
How a House Flipping Calculator Works
Our house flipping calculator does the difficult calculations for you, such as calculating your return on investment. Instead of calculating your house flipping costs by hand, you can simply input them in the house flipping calculator and then input things like your total budget and timeline. The calculator will tell you if the property is worth purchasing based on the after repair value.
Our free house flipping calculator will show you your expected profit and return on investment (ROI) on one fix and flip project. It will also display a graph that shows your expected return on investment on multiple projects if they were to have the same ROI as the first one. This can be helpful when deciding how many projects you want to take on each year, and you can anticipate future potential earnings based on what your return on investment will be.
Who a House Flipping Calculator Is Right For
A house flipping calculator is right for you whether you’re a fix and flip beginner or a more experienced flipper. It can be used to decide whether or not you should purchase a property. It can also show you roughly what amount you should pay for the property, how quickly you need to sell it, and how much you need to sell it for.
After analyzing the results in the house flipping calculator, contact LendingHome. They offer loans that finance the acquisition and rehab of a property and they offer competitive rates to prime borrowers. Pre-qualifying online takes just a few minutes.
House Flipping Calculator Inputs
When using our free house flipping calculator, you will be prompted to input costs associated with fixing and flipping a property. There are several major fix and flip cost categories, which include your acquisition costs, rehab costs, and sales and marketing costs. These inputs are needed in order to calculate things such as your profit per fix and flip project and your ROI.
Fix and Flip Acquisition Costs
Acquisition costs are the first thing you’re prompted to input into your fix and flip calculator. Acquisition costs are the costs associated with purchasing the property. They include the purchase price and all associated closing costs. You need to know how much you spend on acquiring the property so you can set a rehab budget and determine your ROI.
When calculating your acquisition costs, you should research the neighborhood before you make an offer on a property so you know what comparable properties are selling for, both before they’re rehabbed and after. This is an important step when finding a property to flip because it helps you determine the after repair value of the property (ARV).
Typical house flipping acquisition costs include:
- Identify the After Repair Value (ARV) of the Property: The ARV is the expected amount the property will be worth after it has been rehabbed. This can be found by looking at comparable properties and you need to know the ARV before you make an offer on a property so you don’t overpay.
- Fix and Flip Property Purchase Price: This is how much you paid for the property. It’s not necessarily what the property was listed for or what it’s worth, but it is what you actually paid for it. You can find this number on your HUD 1 closing statement.
- Closing Costs on Fix and Flip Property: These are the extra expenses on top of the property’s purchase price. If you don’t know how much your closing costs are, they’re also found on your HUD 1 and typically average 2 percent to 5 percent of the property’s purchase price.
- Total Acquisition Cost of Fix and Flip Property: Your total acquisition costs are the purchase price of the property and the closing costs added together. Once you input both the purchase price and your closing costs, the calculator will add them together and this will be your total acquisition costs.
After you input the property’s ARV, our free house flipping calculator will have a pop-up saying if the property is worth buying or not. Keep in mind that the calculator is telling you “yes or no” based on the inputs you put in the house flipping calculator, and it should be used along with your own research.
Fix and Flip Rehab Costs
After you know how much your acquisition costs will be, you should come up with your total budget. This is working backwards so that you don’t go over budget, because that will reduce your return on investment (ROI). Your total budget will be the amount you plan to spend on rehabbing and selling the property and will include your carrying costs.
The rehab costs include both the material and labor costs involved in rehabbing the property. These vary widely based on how expensive labor is in your area, how large the property is, and the scope of rehab work needed.
If you’re new to fix and flipping, it’s recommended to purchase properties that don’t need any of the following:
- Major renovations such as structural work
- New plumbing
This is because larger jobs have more room for error, can require costly permits, and can go over budget and over your timeline, which can decrease your potential ROI.
Fix and Flip Marketing and Sales Costs
The last input the free house flipping calculator asks for are your marketing and sales costs. These are the costs associated with marketing, advertising and selling your property, including the seller’s closing costs (such as real estate commissions). They also include your carrying costs, which are all of the costs you’re responsible for during your property ownership.
Along with your sales and marketing costs, you need to know the following:
- Loan to Value (LTV) on a Fix and Flip: The LTV is expressed as a percentage of the property’s value that is mortgaged. For example, a lender may lend 80 percent LTV on a property and you will give the remaining 20 percent as a down payment. If you’re not sure of your LTV, you can ask your lender.
- Loan Amount of the Fix and Flip: This is the actual dollar amount of the loan. If you purchased a property for $100,000 and the lender gave you 80 percent LTV, your loan amount is $80,000. This will also be found on your closing documents.
- Loan Term of the Fix and Flip: This is the length of the loan until it is paid off. Typically, fix and flip loans are short term and usually last six months to two years. You can find your loan term on your mortgage documents from settlement or you can ask your lender if you haven’t purchased the property yet.
- Timeline of the Fix and Flip: Typically the shorter your timeline, the higher your potential ROI. Most fix and flippers purchase, rehab and sell a property in 120 days or less. The timeline is important because it affects not only your ROI, but also you carrying costs, including your monthly mortgage payments.
Keep in mind that LTV, loan amount, and loan term are only necessary if you’re getting a mortgage, such as a hard money loan, on the property. If you’re using all cash to pay for the property, your financing costs will be zero.
Sometimes, real estate investors, especially beginners, forget to include some important costs of flipping a house. Let’s take a look at what one of our real estate pros believes are often overlooked costs of flipping a house.
“When an investor sells a fix and flip property, it’s important to know all of your costs, so you know how much money you will make on the deal. Some oftentimes overlooked costs when selling a house are escrow fees, selling recording fees, transfer tax, home warranty, staging costs, and title insurance.”
– Cornelius Charles, Co-owner, Dream Home Property Solutions, LLC
Common fix and flip carrying costs include:
- Your mortgage payments
- Property taxes
- HOA dues
House Flipping Calculator Outputs
After you put all of your inputs into the calculator, it will use them to calculate outputs such as your profit on a fix and flip property, if the property is a good investment, and your potential ROI. You can use these outputs to help you compare them to other properties in the area and other investments that you could make instead of fixing and flipping property.
Is This a Good Property to Purchase for a Fix and Flip?
We mentioned this in the inputs section, but technically, it’s an output because the calculator will give you an answer based on your inputs and then you need to analyze it. After you input your acquisition costs and the property’s potential ARV, the calculator will have a pop-up that says “Yes” or “No” as to whether this is a good property to buy or not. Once again, this isn’t set in stone and is only based on the inputs you put in the calculator.
Total Profit per Fix and Flip Project
This next output will show you the total profit in dollars that you can expect to make on one fix and flip project. This is assuming you stay within your budget, stay within your timeline, and sell it for the estimated ARV.
Fix and Flip Timeline to Stay on Budget
Another unique output on our house flipping calculator is the amount of days, weeks, or months that you can go over your timeline without eating into your profitability. The longer your timeline, the higher your carrying costs, and the lower your potential ROI. The calculator will be able to tell you, from your inputs, how much you can go over your timeline before your ROI becomes negative.
ROI on One Fix and Flip Project
One of the most important outputs on the real estate rehab calculator is the ROI. This is the return you will make on your total investment. The calculator will do the math for you based on your inputs. However, if you want to figure out your projected ROI yourself, take the return on your investment, divide it by the cost of the investment, and multiply by 100 so it’s expressed as a percentage.
You can use your expected ROI to help you:
- Decide if it’s better for you to purchase a fix and flip project or invest your money elsewhere for a higher ROI, such as in a real estate investment trust (REIT), stocks, buying a business, etc.
- Compare the property’s ROI to the average ROI for fix and flippers, which is 15 percent.
Our free house flipping calculator will also show a graph depicting what it would look like if you did multiple projects per year with the same ROI as the first fix and flip project. This can then help you determine how many you need to do per year to make a certain amount of money, or hit a certain goal ROI.
Pros and Cons of Fixing & Flipping Homes
There are both advantages and disadvantages to fixing and flipping houses. One of the main advantages is being able to make a high return on your investment in a relatively short amount of time. However, one of the disadvantages to fixing and flipping houses is that it can be costly, especially for beginners, due to financing costs, rehab costs, and carrying costs.
Pros of Fixing and Flipping Homes
Some of the pros of fixing and flipping houses include:
- Flexibility to work for yourself by starting your own house flipping business
- Additional stream of income if you choose to flip houses part-time
- Not having to deal with the headaches of being a landlord
- Ability to make a large amount of money in a relatively short time frame
Cons of Fixing and Flipping Homes
One of the cons of fixing and flipping houses includes having unanticipated expenses pop up, so that’s why it’s important to add a cushion of about 20 percent into your budget.
Now, let’s take a look at a real estate professional’s thoughts on the cons of flipping houses:
“The barrier of entry isn’t low. You need to have access to large sums of cash, even if using leverage. Many real estate flippers start out wholesaling, where their job is to merely find motivated sellers, get the property under contract, then sell the contract to someone who does have access to the amount of cash necessary to purchase and rehab the property.”
– Jon Sycamore, Owner, Jon Buys Utah Homes
Some other cons of flipping houses include:
- Relatively high initial startup costs to purchase and rehab the property
- Being able to afford the carrying costs
- The risk of losing money by going over budget, over the timeline, or not properly accounting for unanticipated expenses
Here’s another con of flipping houses from one of our real estate pros:
“If you don’t know what you’re doing (and even if you do), you can be burned by unexpected expenses. I’ve had to spend over $20,000 I wasn’t initially planning to spend on house flips after problems were uncovered with frozen pipes, HVAC, and structural issues. Be sure that you plan out all your expenses prior to getting involved in a deal, but your margins should account for the unexpected.”
– Jonathan Weber, Founder, Real Estate Investor, Marathon Studios Inc
Alternative to a House Flipping Calculator
There are no real alternatives to a house flipping calculator, because the fix and flip calculator is used specifically by fix and flip investors to figure out their potential profit and ROI on each project they complete, so other calculators won’t give them the same results.
However, as a real estate investor, there is an alternative to flipping houses. Instead, you could rent out the property, and this case a rental property calculator would be helpful. It helps you calculate your potential cash flow and return on investment on your rental property, similar to what a fix and flip calculator does for you on a property you’re fixing up and flipping.
How Much Does It Cost to Flip a House?
The cost of flipping a house varies by location, scope of work needed, financing used, and size of the property. The cost of flipping a house generally includes the acquisition cost, rehab cost, carrying costs, and the costs to market and sell the property. Figuring out the answer to the question of how much it costs to flip a house by yourself can be daunting, but using a real estate rehab calculator can save you time and do the more difficult calculations for you.
For more information on how much it costs to flip a house, check out our in-depth guide on how much does it cost to flip a house.
You need to know how much it costs to flip a house, which includes things like your acquisition, rehab, and sales and marketing costs, to determine if the project will have a high enough return on investment to make it worthwhile. By using our real estate rehab calculator, you can calculate your ROI as well as your profit on each project you complete.
Once you find the right fix and flip project, you will need financing. Contact LendingHome to get pre-qualified in just a few minutes. They offer hard money loans for investors and offer competitive rates to prime borrowers.