The average house flip cost should be between 40% to 60% of ARV, or average resale value. If you pay more than that, the house flip may end up costing you money after factoring in repair costs, carrying costs, and selling costs.
Average House Flip Costs
The best way to look at costs is to express them as a portion of the target selling price. Your expected sales price, or ARV, should be based on recent comps within a mile of the house being flipped.
Do not overestimate the ARV because it will throw off all your cost estimates and you will most likely end up losing money on your house flip.
Let’s take a look at the average costs for a house flip:
- Purchase cost – 40% to 60% of ARV
- Repair costs – 20% of ARV
- Carrying costs & closing costs – 10% of ARV
The sweet spot for the average house flip costs is a total of 70% of ARV. In some cases a lower cost, say 40% to 50% of ARV, means the house will need more repairs than the average flipper house.
A house to flip that you buy for 60% of ARV should be one that doesn’t need any structural repairs, a new roof, a complete gut of all the bathrooms and the kitchen, etc. Otherwise, you’ll likely end up losing money on the deal.
Average House Flip Cost Video
In this video, real estate investing coach Stefan Aarnario describes how important it is when flipping houses to buy at the right price.
Always follow these average house flip cost ratios and you’ll make money. Overspend on the property cost, the repair cost, or the carrying & closing costs and you will end up underwater on your house flip.