How Much Does It Cost to Flip a House?
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House flipping appeals to real estate investors looking to maximize their profits. But just how much does it cost to flip a house? The national average cost is $47,903, with a typical range of $17,920 to $78,082.
- Typical Range: $17,920 to $78,082
- National Average: $47,903
Optimistic real estate investors often enter a house flip with the hope of making a ton of cash in just a short time. When done correctly, this outcome is certainly possible. But before diving in, potential flippers need to ask themselves an important question. How much does it cost to flip a house?
There’s a lot more to consider than just the purchase price. Insurance, inspections, and of course all the projects that go into flipping a house can quickly add up. That’s why there’s such a wide range in house flipping costs. According to Angi and HomeAdvisor, investors can expect to pay between $17,920 and $78,082 for a full renovation to flip a home, with a national average cost of $47,903. The final price tag depends on a variety of factors, including a home’s age and style and how many different types of contractors need to be brought in to refinish the home.
This guide will cover the factors that go into the cost to flip a house, the pros and cons of house flipping, and how investors can save money on a flip.
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Factors in Calculating the Cost to Flip a House
Flipping houses takes grit and, in most cases, an awful lot of cash. There’s more to calculate than purchase price and materials, and all the different characteristics of a home play a role in estimating the final number. Being able to accurately calculate how much it costs to flip a house is often the difference between barely breaking even and making a sizable profit. The following are the top factors investors need to consider when calculating the cost to flip a house.
Purchase, Insurance, and Ownership Costs
How much money do you need to buy a house? The cost of property acquisition is more than a home’s asking price. Potential flippers need to consider taxes, insurance, title fees, financing fees, and additional acquisition costs in addition to the home’s sale price. For example, the average cost for an insurance policy to cover a vacant or unoccupied home costs $1,842 annually.
There are many different numbers to crunch when deciding whether a potential flip is a wise investment, and it can be difficult to predict them all. It’s wise to leave plenty of financial padding when budgeting for a flip. That’s why many flippers follow something called the 70 percent rule. In general, flippers will want to avoid purchasing homes that cost more than 70 percent of the after-repair value, or ARV (the estimated value of a property after a finished flip), minus the cost of repairs.
For example, an investor may find a home in a sought-after neighborhood that is on the market for $225,000. After some research into the market, they believe they could sell the home for $300,000 after fixing it up. They would then consult a general contractor to get an estimate of how much repairs would cost; in this case, they find that the total repair cost would be $30,000. Using the 70 percent rule, the math would look something like this:
(300,000 × .70) − 30,000 = 180,000
With the property’s asking price at $225,000, the investor would likely pass on the opportunity unless they could get the seller to accept $180,000. In this case, purchasing the home for its asking price and flipping it could result in the investor losing money. They could either try to negotiate the price down to $180,000 or keep looking for a different property to flip with numbers that line up better with the rule of 70.
Home Size
A home’s size plays a large role in how much it will cost to flip. Generally speaking, the larger a house is, the more rooms it has. With more rooms come more walls, windows, doorways, and doors, all of which are potential projects.
When trying to estimate the cost to flip a house by size alone, investors can expect to pay between $10 and $60 per square foot for renovations. However, investors who choose high-end materials or top-of-the-line appliances can expect this number to shoot up closer to $150 per square foot. Investors will want to keep in mind that they may not need to renovate every square foot of the property; there may be some parts of the home that are salvageable but just need a good cleaning. That’s why it’s important for buyers to note how long it’s been since previous bathroom renovations or kitchen overhauls. Being able (or unable) to cross off a fraction of a home’s square footage that requires renovation can help portray a more accurate cost.
Home Type
The type of home being considered for a flip is important when estimating the total investment cost. Some types of homes are traditionally smaller or larger, while other types of homes may have HOA guidelines that a flipper must adhere to. For example, an apartment building may require the same basic updates expected in a flip but on a smaller scale, such as a bathroom overhaul and a brand- new kitchen. Flippers can expect to pay between $25 and $40 per square foot for renovations in an apartment building.
Condos are similar, but flippers often need to plan according to homeowner association (HOA) rules. This often results in a higher budget with typical renovation costs of $70 to $100 per square foot. Townhouses can also have HOA rules for flippers to follow, though renovations tend to be more affordable with a range between $10 and $35 per square foot.
Renovating row houses often involves finding matching materials for connecting homes, resulting in a flipping price range of $25 to $75 per square foot. Finally, mobile homes are easier to estimate by project and come with a typical renovation cost range of $10,000 to $30,000, mainly dependent on square footage.
Home Style
Certain home styles may warrant a higher flipping budget than others. To meet expectations of potential buyers, it’s best for flippers to stick with one style type for a cohesive aesthetic. Therefore, it’s important for flippers to choose a style that will fit their budget from the home’s front door to every corner of every room.
Farmhouse is a popular home style with many buyers. On average, upgrading a home to this rustic and cozy look costs between $10 and $50 per square foot. Flipping a Victorian home often involves preserving a historical home, which may require purchasing time period–appropriate materials that can be more expensive. Victorian-style homes often need to be brought up to code or involve structural upgrades along with cosmetic changes. This can all add up to a higher flipping cost, and on average, it costs between $20 and $200 per square foot to renovate a Victorian home to flip.
Not all historical homes are Victorian, though, and restoring any type of historic home often comes with a higher price range for flippers. A typical historical home flip costs between $100 and $200 per square foot. The good news is that many historical homes, especially if they’re listed on the National Register of Historic Places, qualify for grants that can help cover the cost of renovations.
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Home Age
When it comes to flipping homes, the property’s age should be taken into account. A newer house is likely to be in better overall shape, which minimizes the chance of expensive upgrades or projects such as bringing electrical work up to code. Older homes can incur higher labor costs if contractors have to deal with health hazards such as lead paint or asbestos. New homes are built with safer materials that don’t pose health risks to contractors.
Investors shouldn’t rely on a home’s age alone though to determine whether it carries a high or low potential for profit. A poorly constructed new home may require more work than an older home that’s already gone through a few rounds of renovations. The best way to use a home’s age to help estimate its flipping cost is to also explore its history.
Home Condition
A home’s condition plays a huge factor in its flipping cost. A house that’s in overall good condition is likely to need cosmetic updates, such as new floors, updated paint colors, and replaced trim work throughout. A house flipper can expect to pay around $20,000 for a full renovation of a home in good condition.
But a home that’s battered and beaten, either due to neglect, vacancy, or disaster, is likely to require a higher flipping budget. Investors can expect to put in up to $100,000 on restoring a home in poor condition. For oversize or historical homes, this number could be even higher.
Room Types
A flipper can get a better idea of what they’ll need to budget for by splitting the rooms in a home into two categories. Wet rooms are those with water running to them; examples include kitchens, bathrooms, and laundry rooms. Dry rooms do not have water sources and include bedrooms and living areas. Generally speaking, wet rooms cost more to renovate than dry rooms.
For example, bathrooms have an average price range of $3,000 to $25,000 to renovate. Kitchens start at $6,000 and can soar into six-figure remodels. Utility rooms also start at $6,000 to renovate. A bedroom is a dry room so even though it starts at a higher minimum of $10,000 to renovate, the cost will rarely exceed $15,000. A living room typically costs between $5,000 and $10,000 to renovate.
Knowing how many of each room type a house has and then breaking down the numbers accordingly can help a house flipper determine their budget while helping them stay on track without exceeding costs.
HVAC Repair or Replacement
Heating, ventilation, and air-conditioning repair or replacement are important factors to consider when determining a house-flip budget. An HVAC unit typically costs between $500 and $7,200, though the exact cost depends on brand, labor, and the specifics of the installation.
Central air installation costs between $3,800 and $7,600, while a furnace install costs between $2,800 and $6,800. A heat pump replacement or installation costs between $4,200 and $7,500, while replacing ducts and vents costs between $500 and $2,100.
Appliance Replacement
Replacing appliances is a necessary, albeit sometimes tricky, process of a house flip. While leaving appliances as is can leave potential buyers disappointed, going overboard with upgrades can leave less room for profit.
Appliances cost anywhere from $200 to $10,000, though this number can increase with high-end brands. It’s wise to spend more on the appliances buyers notice the most, such as stoves and refrigerators, and be more modest (without being cheap) on dishwashers or washing machines.
For basic or discount appliance models, flippers can expect to pay between $100 and $2,000. For high-end models, the price range grows to between $300 and $5,000. Energy Star appliances cost between $200 and $3,500, while custom built-in appliances start at $1,000 and can approach $10,000 apiece. But when they make sense in a design, expensive appliances can help secure top dollar from a buyer.
Labor
When flippers are working with multiple contractors, there are several different price ranges labor costs can fall into. In general, labor costs for house renovations typically fall between $20 and $150 per hour. This range can be narrowed down by profession to make it easier to anticipate costs.
More specifically, architect fees range between $125 and $250 per hour, while interior designers charge between $50 and $200 per hour. Kitchens can often benefit from an expert who can weigh in on functionality and design, so investing in a kitchen designer can be a wise choice. These pros tend to charge between $65 and $250 per hour.
Painters charge $20 to $50 per hour, while plumber rates range from $45 to $200 per hour. Electricians charge between $50 and $100 an hour, and an hourly HVAC technician charge can range from $50 to $150. When it comes to the cost to renovate the exterior of a home, landscape designer fees run between $50 and $150 per hour.
Geographic Location
A home’s location can greatly influence its total cost to flip. In fact, homes renovated in a densely populated area can cost up to 40 percent more to flip than those in more rural areas.
For flippers shopping by location, here are a few numbers to keep in mind. Homes flipped in Jacksonville, Florida, are the least expensive, costing $15 to $60 per square foot. Homes in Phoenix, Arizona; Los Angeles, California; and Denver, Colorado, all fall within a range of $20 to $100 per square foot to flip. Finally, homes in Houston, Texas; New York City; and San Francisco, California, all have the highest renovation costs. On average, homes in these locations cost between $25 and $150 per square foot to flip.
On a final note, location alone isn’t enough to determine whether a flip is a good investment or not. Investors should also remember that homes located in more densely populated areas, though more expensive to flip, also tend to sell for more than those in less populated regions of the country.
Selling Costs
Selling costs, or closing costs, are another factor to keep in mind when flipping a home. These additional costs include transfer taxes, property taxes, property insurance, title company fees, and title insurance.
As a general rule of thumb, house flippers can expect selling costs to equate to about 2 percent to 5 percent of the home’s final sale price. Selling costs can be negotiated, which is smart for flippers to attempt, since selling costs can cut into profits both when the house is purchased and when it’s sold. In many cases, only the buyer pays closing costs. But there are scenarios where sellers may have to pay a portion of these costs as well. Who pays what is determined in the sales contract, not at the closing table, so flippers looking minimize their selling costs will want to be sure those items are clearly defined in the contract.
Additional Costs and Considerations
The following additional costs and considerations don’t apply to every home flip. But investors should still be aware of them to avoid surprises as they move through their renovation timeline.
Loan Costs
There are a few different ways to fund a house flip; it’s not uncommon for a veteran investor to be able to pay cash for a home and to avoid additional costs and fees. But for new flippers or those taking on a home worth more than they’re willing or able to pay for in cash, an asset-based loan is usually the answer.
The best loans for flipping houses are short-term and secured by an asset, including property. It’s typically easier to qualify for an asset-based loan because the collateral serves as security to the lender. But the caveat is that interest rates are often higher than traditional bank loans, with most asset-based loans carrying an APR (annual percentage rate) of 9 percent to 15 percent. Despite the higher interest rates, many flippers still flock to asset-based loans over traditional ones since banks are reluctant to fund flips due to the risk involved.
No matter the type of loan, flippers should always consider the interest rates when estimating the potential for profit in a flip.
Permits
When it comes to flipping houses, a permit is almost always required. In fact, the homeowner can expect the need for multiple permits before a flip can begin. Issued by local government agencies, a permit is an official approval that allows a home improvement project to proceed. Permits are issued to ensure projects are done safely and comply with local standards, since even experienced contractors can make mistakes. Homes being renovated to flip need to have permits for the work being done to make sure they’re up to code and current safety standards.
When tackling a house flip, investors can expect to pay between $400 and $1,800 on average for permits. Contractors may include the cost of obtaining permits in their project bid, which can mean one less task for a home flipper to worry about.
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Interior vs. Exterior Upgrades
Some home flips involve changes to the interior only, while others focus mainly on the exterior. Plenty are a combination of both areas, with each space incurring different average renovation costs.
Flippers can expect exterior work to cost between $5,000 and $15,000 on average, while the cost for interior upgrades depends heavily on the type of space. For example, updating a bedroom costs around $5,000, while renovating a kitchen costs between $30,000 and $60,000.
Home Additions
A home addition can be a pricey add-on with a typical range of $2