Fix and Flip Calculator
This calculator helps you estimate the potential profit from a real estate fix and flip project. Enter the costs and expected sale price to see your potential return.
Estimated Profit
Understanding Fix and Flip
The fix and flip strategy involves purchasing a distressed property, renovating it to increase its value, and then selling it quickly for a profit. Success in this venture hinges on accurate cost estimations and a realistic appraisal of the After Repair Value (ARV).
Key Components:
- Property Purchase Price: The initial cost to acquire the property. This is a critical baseline for your investment.
- Rehabilitation Costs: All expenses related to repairs and renovations. This can range from cosmetic upgrades to major structural work. It's crucial to get detailed quotes for these costs.
- Holding Costs: These are the expenses incurred while you own the property before selling. They include property taxes, insurance premiums, utility bills, and any interest paid on a loan used to finance the purchase and renovations. Estimating the duration of the holding period is vital for calculating these costs accurately.
- Selling Costs: Once the property is ready for sale, you'll incur costs such as real estate agent commissions (typically 5-6% of the sale price) and closing costs (which can include title fees, escrow fees, and transfer taxes).
- After Repair Value (ARV): This is the estimated market value of the property once all renovations are completed. It's typically determined by comparing the renovated property to similar recently sold properties in the area (comps). An accurate ARV is essential for projecting your potential profit.
How the Calculator Works:
The calculator sums up all your estimated expenses (Purchase Price + Rehabilitation Costs + Holding Costs + Selling Costs) to determine your Total Project Cost. It then subtracts this Total Project Cost from the After Repair Value (ARV) to provide your Estimated Profit. A positive result indicates a profitable venture, while a negative result suggests a potential loss.
Example:
Let's say you purchase a property for $150,000. You anticipate $30,000 in rehabilitation costs, $5,000 in holding costs over 6 months, and $15,000 in selling costs. You estimate the ARV to be $250,000.
- Total Expenses = $150,000 (Purchase) + $30,000 (Rehab) + $5,000 (Holding) + $15,000 (Selling) = $200,000
- Estimated Profit = $250,000 (ARV) – $200,000 (Total Expenses) = $50,000
This example shows a potential profit of $50,000. Remember that these are estimates, and actual costs can vary.