Calculating ROI on a house flip is the single most important skill for a fix-and-flip investor. Get it wrong, and a deal that looks profitable on paper bleeds money in reality. Get it right, and you can confidently compare deals, set minimum thresholds, and build a repeatable business.
This guide walks through the house flip ROI formula, every cost you need to include, a worked example with real numbers, and practical ways to push your returns higher on future deals.
The House Flip ROI Formula
ROI on a flip is straightforward:
ROI = (Net Profit / Total Investment) x 100
Net Profit is your sale price minus every dollar you spent on the project. Total Investment is the sum of all costs: purchase, rehab, holding, closing, and financing. Some investors calculate ROI on total project cost. Others calculate it on cash invested (cash-on-cash return). You should run both numbers.
Every Cost You Need to Include
The biggest mistake new flippers make is underestimating total project cost. Here is the full list of cost categories you need to account for before you calculate ROI.
Purchase costs: The contract price of the property, plus buyer-side closing costs. Closing costs typically include escrow and title fees, document preparation fees, recording fees, and prepaid interest. Plan for closing costs to run between 2% and 5% of the loan amount.
Rehab costs: Your renovation budget should be broken down by trade or category: demolition, framing, electrical, plumbing, HVAC, finishes, permits, and a contingency reserve of 5% to 10% of total rehab cost. Lump-sum estimates leave you exposed to surprises. Detailed line-item budgets backed by contractor bids give you real numbers to work with.
Holding costs: Every month you own the property costs money. Include property taxes, insurance, utilities, HOA dues if applicable, and any property maintenance. These add up fast on a project that runs long.
Loan costs: If you finance the deal with a hard money loan, add up total interest over your expected hold period, plus origination points, plus any lender fees. A $400,000 loan at 11% for 6 months with 2 points costs roughly $30,000. Always run the numbers on your actual hold timeline, not just the annual rate.
Selling costs: When you sell, you pay agent commissions (typically 5% to 6% of the sale price), seller-side closing costs, transfer taxes, and any concessions to the buyer. These eat into your profit more than most new investors expect.
Worked Example With Real Numbers
Here is a full deal breakdown on a fix-and-flip project.
Purchase price: $300,000
After-repair value (ARV): $450,000
Hard money loan: $360,000 (covering purchase + rehab at 80% of ARV)
Total costs:
- Purchase price: $300,000
- Buyer closing costs (3%): $10,800
- Rehab budget: $60,000
- Contingency reserve (10%): $6,000
- Holding costs (6 months): $7,200
- Loan interest (11% on $360,000 for 6 months): $19,800
- Origination points (2 points on $360,000): $7,200
- Selling costs (6% of $450,000): $27,000
Total project cost: $438,000
Sale price: $450,000
Net profit: $450,000 - $438,000 = $12,000
ROI on total project cost: ($12,000 / $438,000) x 100 = 2.7%
That is a thin deal. Now look at it from a cash-on-cash perspective. If the investor brought $78,000 out of pocket (down payment plus closing costs plus holding costs) and the rest was financed, the cash-on-cash return is ($12,000 / $78,000) x 100 = 15.4%. Better, but still tight after accounting for the investor's time.
This is exactly why running the full numbers matters. A deal that looks like a $150,000 spread between purchase price and ARV turns into $12,000 in net profit once you account for every real cost.
What a Good ROI Looks Like
Most experienced flippers target a minimum net ROI of 15% to 25% on cash invested. Some use the 70% rule as a quick filter: never pay more than 70% of ARV minus rehab costs. In the example above, the 70% rule sets the max purchase price at ($450,000 x 0.70) - $60,000 = $255,000. Buying at $300,000 broke that rule, and the thin profit reflects it.
A deal that returns less than 10% on cash invested is generally not worth the risk. Unexpected costs, a slower market, or a project that runs two months long can wipe out a slim margin entirely.
How to Improve ROI on Future Deals
Buy at a deeper discount. Your profit is made at the purchase, not the sale. Negotiating a lower purchase price is the single biggest lever you have. Target motivated sellers, off-market deals, and properties that need cosmetic work rather than structural repairs.
Control your rehab scope. Focus on improvements that drive the highest return per dollar spent: kitchens, bathrooms, flooring, and curb appeal. Avoid over-improving for the neighborhood. Get multiple contractor bids and keep your budget detailed so there are no surprises.
Reduce hold time. Every month you hold a property costs money in interest, taxes, insurance, and utilities. A faster renovation means lower holding and loan costs. Have your contractor lined up before you close so work starts immediately.
Negotiate better loan terms. As you build a track record of successful flips, you earn leverage with your lender. Repeat borrowers often qualify for lower rates and reduced origination fees. Even a half-point reduction in rate or one fewer origination point saves thousands per deal.
Minimize closing costs. Shop your title and escrow fees. Work with agents who offer competitive commission structures. Small savings on both the buy side and sell side compound across multiple deals per year.
Run the Numbers Before Every Deal
Calculating ROI on a house flip is not optional. It is the difference between building wealth and losing money. Include every cost, use realistic estimates, and set a minimum ROI threshold you will not go below. The investors who succeed long-term are the ones who know their numbers cold before they ever make an offer.
