House flipping can still make money, but there’s less room for error than there used to be. The difference between a good flip and a break-even one often comes down to whether you know exactly what each property cost you. That’s where job costing and accurate books come in.
1. What the numbers look like right now
- Average gross return on house flips is at its lowest point in roughly 15 to 17 years.
- According to ATTOM data, it’s running around 23.1% to 25.5%.
- After rehab and holding costs, the real net margin is closer to 5% to 10%.
- With margins that thin, a few costs you didn’t track can wipe out most of your profit.
2. A few terms worth getting straight
- Gross profit is the difference between what you paid for the house and what you sold it for. It leaves out labor, materials, permits, loan interest, closing costs and overhead.
- Net profit is what’s actually left after every cost: the rehab, the holding costs and the fees.
- Job costing means tracking expenses for each property separately, apart from your general business overhead.
3. Where investors lose track of money
- The common mistake is going by national averages or a rough feel instead of tracking every transaction for each property.
- What happens then: holding costs nobody assigned to the project, subcontractor bills that run over, and closing charges that weren’t planned for. Each one quietly eats your margin.
- I think of it as money leaking out of the deal without anyone noticing.
- The fix is solid small business bookkeeping services and a clear record of costs for each project.
4. How to sort your flip expenses
- Buying the property:
- Purchase price
- Title search fees
- Recording fees
- Transfer taxes and local fees
- Renovation:
- Subcontractor labor
- Materials and delivery
- Permits, architectural review and engineering reports
- Holding the property:
- Property taxes
- Insurance
- Utilities (electric, water, gas)
- Loan interest, points and construction loan fees
- Selling:
- Agent commissions
- Seller closing costs
- Staging, cleaning and listing photos
5. Figuring your real return
- Net ROI = (sale price minus purchase price minus all job costs) divided by (purchase price plus the capital you invested).
- To get that number right, your bookkeeping and financial statements should be reconciled every quarter.
- Better still, update the books at each stage of the project: purchase, structural work, mechanical/electrical/plumbing, finishes, and sale.
6. Getting help with the books
- Handing the bookkeeping to someone else cuts down on data entry mistakes and keeps the books from falling behind while you’re busy on the job site.
- I offer outsourced bookkeeping services through MilesP Bookkeeping. I’m Miles, a certified QuickBooks ProAdvisor working with investors in Columbia, Waterloo and Belleville, IL and St. Louis, MO.
- That includes checking your trial balance, reconciling your bank accounts, putting every expense in the right category, and compliance reporting.
- If you’d like to talk it through, reach out here or call (800) 926-7710.
7. The bottom line
- This applies to house flippers, small property investors and residential builders.
- The goal is simple: books that match reality, margins that don’t shrink without you knowing, and taxes done right.
- Keep an eye on the numbers for every property you have going, not just at the end.