If you’re flipping a house with a hard money loan, what’s the formula for calculating profit or loss? Here’s what you need to know.
What’s the Formula for Calculating Profit or Loss on a Flipped House?
Your profit is equal to the sales price minus the purchase price, minus rehab costs and fixed costs.
Let’s say you sell a house for $200,000, but you bought it for $125,000 and spent $25,000 on rehabbing it. Your fixed costs are $5,000. Your formula looks like this:
Profit = $200,000 – $ 125,000 – $25,000 – $5,000
Your profit on this house is $45,000.
The sales price is, at least before you sell, an estimate of what you’ll sell the house for. It’s best to come up with a conservative estimate.
Your purchase price is how much money you spent to buy the house.
Rehab costs include the materials and labor necessary to get the house into resale condition.
Fixed costs are the fees, commissions and other costs you have to pay during the project, including closing costs (yours, and in some cases, the buyer’s as well). These can include:
- Closing costs
- Interest on your hard money loan
- Lawn care
- Property taxes
- Transfer taxes
You’ll also have to figure in taxes, but they’ll vary based on each transaction.
Are You Looking for a Hard Money Loan to Buy a Property?
Call us at 404-814-1644 or contact us online to find out whether you might qualify for this type of funding in Tennessee, Georgia or Florida. In the meantime, check to ensure that you meet our loan criteria. Our loan amounts can be up to 65 percent of the after-repaired value of the collateral—and if you use the loan for renovation or construction, the loan amount can be based on the collateral’s improved value.
Read our frequently asked questions and take a few minutes to learn about the hard money loan process.