House Flipping ROI: What Profit Margin Should You Target?
A full worked example of flip ROI, what counts as a solid target, and the risk factors that erode it fastest.
Many flippers target 10-20%+ ROI on total investment. In a worked example — $274,000 total investment against a $340,000 after-repair value, with 8% selling costs — the resulting $38,800 profit worked out to a 14.16% ROI, a solid result by that benchmark.
Run your own numbers through our house flipping ROI calculator.
A flip's headline number is always the sale price, but the number that actually matters is the return on everything it took to get there — purchase, renovation, and every month the project sat unsold. Here's how to calculate flip ROI correctly, what a solid target looks like, and the two risk factors most likely to turn a promising flip into a break-even one.
The Flip ROI Formula
Total Investment = Purchase Price + Renovation + (Monthly Holding Costs × Months Held)
ARV — after-repair value — is what the property is expected to sell for once renovated, typically estimated from recent comparable sales. Total investment bundles three things: what you paid for the property, what you spent fixing it, and what it cost to hold it (loan interest, property tax, insurance, and utilities) for however many months the project actually took.
Worked Example
A property purchased for $220,000, with a $45,000 renovation budget, $1,800/month in holding costs over a 5-month project, sold at a $340,000 ARV with 8% selling costs:
| Line item | Calculation | Result |
|---|---|---|
| Holding costs total | $1,800 × 5 months | $9,000 |
| Total investment | $220,000 + $45,000 + $9,000 | $274,000 |
| Selling costs | $340,000 × 8% | $27,200 |
| Profit | $340,000 − $274,000 − $27,200 | $38,800 |
| ROI | $38,800 ÷ $274,000 | 14.16% |
A 14.16% return over a 5-month project is a solid outcome. But ROI alone doesn't tell you whether that return was earned quickly or slowly — which is where annualizing the number matters.
Why Timeline Changes What "Good ROI" Means
A 14.16% ROI earned in 5 months is a very different result from the same 14.16% earned over 18 months. To compare flips of different lengths fairly, annualize the return: divide the ROI by the number of months held, then multiply by 12. The 5-month flip above annualizes to roughly 34% — a strong pace. The same 14.16% profit stretched over 18 months would annualize to under 10%, a much less attractive use of capital over that period. Two flips can show an identical ROI on paper and represent very different quality decisions once you account for how long the money was tied up.
The 70% Rule: A Purchase-Price Filter, Not a Return Calculation
Many flippers use a quick screening heuristic before running full numbers on a deal: don't pay more than 70% of ARV minus estimated repair costs.
On the property above (ARV $340,000, repairs $45,000), the 70% rule suggests a maximum purchase price of ($340,000 × 0.70) − $45,000 = $193,000 — notably below the $220,000 actually paid, which is exactly why the full ROI calculation (not just the 70% rule) is what should drive the final decision. The rule is a fast filter for whether a deal deserves a closer look, built with an assumed margin for selling costs and profit baked in; it's not a substitute for calculating actual projected ROI once you have real renovation and holding-cost estimates.
What Actually Erodes Flip ROI
Usually predictable
- Purchase price
- Financing terms and rate
- Standard selling costs (agent commission, closing)
The two biggest risk factors
- Renovation budget overruns — unexpected structural, electrical, or plumbing issues found mid-project
- ARV coming in below comps — the market shifting, or the finished product not appraising as high as projected
Either one directly shrinks profit, and both are common enough that experienced flippers build a contingency buffer — often 10-15% on top of the renovation budget — into their total investment estimate before ever making an offer.
Worth knowing: Holding costs are the line item most new flippers underestimate, because they scale with delay rather than with a fixed budget line. A permitting delay, a contractor falling behind schedule, or a slow sale all quietly add months of interest, tax, insurance, and utility costs that a rushed initial estimate often leaves out.
Frequently Asked Questions
What is a good ROI for house flipping?
Many flippers target 10-20%+ ROI on total investment to compensate for the risk, labor, and holding costs involved. In a worked example — $274,000 total investment, $340,000 ARV, 8% selling costs — the resulting profit of $38,800 was a 14.16% ROI, a solid result by that standard.
What's included in "total investment" for a flip?
Purchase price, renovation budget, and holding costs (loan interest, taxes, insurance, and utilities during the project) added together — monthly holding cost multiplied by the number of months the project takes.
What is the 70% rule in house flipping?
The 70% rule is a purchase-price screening heuristic: don't pay more than 70% of the after-repair value minus the estimated repair costs. It's a quick filter for whether a deal is even worth analyzing further, not a substitute for calculating actual ROI once you have real numbers.
Why does the holding period matter so much for flip ROI?
Holding costs accrue every month a flip isn't sold — loan interest, taxes, insurance, and utilities. A flip that takes 10 months instead of a planned 5 doesn't just take longer, it also doubles a real cost line item, which can turn a solid ROI into a mediocre one even if the sale price doesn't change.
What's the biggest risk to a flip's ROI?
Renovation budget overruns and the after-repair value coming in below what comps suggested are the two most common ways a flip's actual ROI falls short of the projected one — both directly shrink the profit the ROI calculation is based on.
