Every number in a flip is an estimate until the house sells. The purchase price is the only one you set yourself, which is why it deserves the most argument before you sign anything.
What does this flip make when nothing goes wrong?
Start with a deal that works on paper. The house costs $160,000, the rehab is budgeted at $60,000, and the finished house should sell for $320,000. The loan covers 85% of the price and all of the rehab at 10% with two points, and the plan is to sell seven months after closing. Holding costs, meaning the taxes, insurance, utilities and loan payments while nobody lives there, run $1,100 a month.
| Amount | |
|---|---|
| Sale price | $320,000 |
| Purchase price | −$160,000 |
| Rehab | −$60,000 |
| Closing costs when you buy (2%) | −$3,200 |
| Holding costs ($1,100 a month for 7 months) | −$7,700 |
| Loan points (2% of the $196,000 loan) | −$3,920 |
| Loan interest (7 months at 10%) | −$11,433 |
| Selling costs (8% of the sale price) | −$25,600 |
| Profit | +$48,147 |
These are example figures, not a forecast for any market.
That is $50,253 of your own cash in and $48,147 of profit out, and it holds only while every line above holds. Five of those eight lines are estimates made before anyone opens a wall. The point of running them one at a time is to find out which estimate you cannot afford to be wrong about.
It also shows why the headline numbers for flipping read high. ATTOM’s Q2 2026 home flipping report, released on October 1, 2026, put the typical gross profit at $60,526, or 21.5% of what the flipper paid. Gross profit is the resale price less the purchase price, and ATTOM says it leaves out rehab costs and other expenses, which the report says flipping veterans estimate at 20% to 33% of the finished value. On the house above, gross profit is $160,000. The $48,147 is what survives the other six lines.
How much does overpaying for the house cost?
The 70% rule caps the offer at 70% of the finished value less the rehab, which on a $320,000 resale with a $60,000 rehab is $164,000. Pay $180,000 instead and the deal still closes: a lender will finance it, and the house still sells for $320,000. The profit falls to $26,415.
That one decision costs $21,732, more than any other item on this list. It is also the only one you cannot fix later. A rehab can be trimmed and a house can sit on the market another month, but the price you paid is settled at closing.
What do a rehab overrun and a high resale guess cost?
A rehab 20% over budget, $72,000 instead of $60,000, leaves $35,207. The extra $12,000 costs $12,940, because the loan carries part of it and charges points and interest on the way. Walking a house once and writing down a number is how budgets go 20% over; see what every $1,000 of overrun costs for how to build the figure from scopes instead.
Setting the resale price from what similar houses are asking, rather than what they sold for, is the costlier habit. Sell this house at $300,000 and the profit is $29,747, down $18,400. A 6% miss on the sale price took 38% of the profit, because every cost stayed where it was. Three sales can give three different ARVs on the same house, so it is worth knowing which sales yours rests on.
What do extra months and higher selling costs cost?
Three extra months, ten instead of seven, leaves $39,947. The $8,200 goes to three more months of holding costs and three more months of interest on a loan that is charging 10%.
Budgeting 8% to sell and paying 10% leaves $41,747, a $6,400 difference. The extra two points cover a full commission on both sides plus the concessions a buyer asks for when the house has been listed a while. Those two often arrive together, since a house that sits is also a house that gets negotiated.
Why is the profit not what you keep?
Tax comes out of the $48,147, and a flip is taxed on the worst schedule. The IRS says that if you hold an asset more than one year the gain is long-term, and one year or less makes it short-term. Short-term gains are taxed as ordinary income at graduated rates, so a house sold seven months after closing is taxed at your income rate rather than the lower long-term rate. The arithmetic depends on your own bracket and on how the sale is reported, so ask a tax professional; how flipping profits are taxed walks through the shape of it.
What is the price where this flip breaks even?
$267,667. That is 16% below the $320,000 the plan is built on, and it is the single most useful number in the deal, because it tells you how much room the resale estimate has before the flip stops paying you for seven months of work.
Here is the whole list on one house.
| Profit | What it costs | |
|---|---|---|
| Nothing goes wrong | $48,147 | – |
| Pay $180,000 instead of $164,000 | $26,415 | −$21,732 |
| Rehab runs 20% over, to $72,000 | $35,207 | −$12,940 |
| Sells at $300,000, not $320,000 | $29,747 | −$18,400 |
| Ten months on the job, not seven | $39,947 | −$8,200 |
| 10% to sell instead of 8% | $41,747 | −$6,400 |
| Taxed as ordinary income, not at the long-term rate | Depends on your bracket | Ask a tax professional |
| Not knowing the deal breaks even at $267,667 | Found out late | The whole deal |
What happens when three mistakes land at once?
They rarely arrive one at a time. A rehab that runs over usually runs long, and a house that needs more work than you thought often appraises and sells for less than you hoped.
Put three of them together on this house, a $72,000 rehab, ten months, and a $300,000 sale, and the profit is $8,307 on $59,693 of cash. Ten months of work for 14% on the money, before tax.
Two numbers would have caught most of this before closing. Work out the most the house can cost you and still pay, and work out the sale price where the profit reaches zero. A first flip, step by step sets out the rest of the order, but those two come first.