Flips rarely lose money because of the purchase price. They lose money because they take longer than planned, and every month of delay costs real cash.
01The costs that keep running
- Interest: hard-money loans are usually interest-only, often 10–13% a year.
- Property tax: one-twelfth of the yearly bill every month.
- Insurance: vacant-home or builder's-risk policies cost more than a normal policy.
- Utilities: power, water and gas for the crew and showings.
- HOA, lawn care and security checks on an empty house.
02A worked example
A $200,000 hard-money loan at 11% costs about $1,833 a month in interest. Add $300 of property tax, $200 of insurance and $350 of utilities and upkeep: about $2,683 a month. Over a 6-month flip that is about $16,100, and each extra month adds another $2,683.
03Put holding costs into your offer
When you calculate a maximum offer, include holding costs for the full time plus one buffer month. The free holding cost calculator shows the monthly and total figure, and the fix and flip calculator adds them to the full profit picture.
04Vacant houses and holding costs
Owners of vacant houses pay holding costs too, without rent coming in. That is why vacant and likely-vacant properties are strong seller signals; LeadCounty marks them from city vacancy cases and its likely-vacant model.
