What is a Realistic Budget for a House Flip?

Set a Realistic Budget

Flipping houses can be a profitable venture, but only if you budget wisely. A common mistake new investors make is underestimating costs, leading to tight margins—or worse, losses. So, what does a realistic budget for a house flip look like? Let’s break it down.

The Key Components of a House Flip Budget

When creating a budget for a flip, you need to account for several key expenses:

1. Purchase Price

The first and biggest cost is the property itself. The general rule of thumb is the 70% rule:📌 You should pay no more than 70% of the After Repair Value (ARV) minus renovation costs.

Example: If a home’s ARV is $250,000 and repairs cost $40,000:

• 70% of $250,000 = $175,000

• $175,000 - $40,000 = $135,000 (max purchase price)

  
  

2. Renovation Costs

This varies depending on the property’s condition. Basic cosmetic updates (paint, flooring, fixtures) might cost $20K-$30K, while full remodels (kitchen, bathrooms, roof, HVAC) can exceed $50K+. Always get contractor estimates before finalizing numbers.

3. Carrying Costs

While flipping, you still have to pay:

✔️ Mortgage or loan payments

✔️ Property taxes

✔️ Utilities

✔️ Insurance

Budget for 3-6 months of these expenses to be safe.

4. Selling Costs

Once your flip is complete, you’ll have closing costs, realtor commissions (typically 5-6% of the sale price), and potential staging fees.

Final Thoughts on Flip Budgeting

A realistic flip budget should include ALL these costs—not just the purchase and renovation. A well-planned budget ensures you stay profitable and avoid financial surprises. Although you can never predict all costs, you should always have a buffer in place just in case.

🔹 Pro Tip: Always add a 10-15% buffer for unexpected costs. Flipping is all about smart planning, so the better you budget, the better your profits!

The information in this article are of the experience and opinion of the author. Due diligence should always be done before investing in real estate.