Take the sale price and subtract every dollar the project cost from the day you bought it to the day it closed. Most people subtract the purchase price and the rehab, and stop there. The real number is usually lower, because the costs that get left out are the ones spread across months: loan interest, insurance, utilities, taxes, and fees on both ends of the deal.
The full calculation
Start with the sale price, then subtract:
Purchase price
Buying costs: closing costs, title, inspection, appraisal, loan origination points and fees
Rehab costs: materials, labor, permits, dumpsters, equipment rental, and anything you paid a contractor
Holding costs: loan interest, property taxes, insurance, utilities, lawn care, and HOA dues for every month you owned it
Selling costs: agent commissions, seller closing costs, staging, concessions, and any repairs the buyer asked for
What's left is your profit before tax. If you used your own cash, that's the figure to compare against what you put in.
Where the number usually goes wrong
Holding costs get forgotten. A project planned for 4 months that runs 7 picks up 3 extra months of interest, insurance, utilities, and taxes. These come out of the bank account in small amounts, so they rarely show up in a quick estimate.
Loan payments get counted the wrong way. The loan payoff at closing isn't an expense, it's the loan going away. The interest you paid along the way is the cost. Counting the full payoff, or none of the interest, gives you the wrong profit.
Costs from one project land on another. If you have 2 flips running and buy materials for both on the same card, it's easy to load one project with the other's costs. One looks like a great deal and the other looks like a loss, and neither number is right.
Personal card and cash payments go missing. A run to the hardware store on a personal card, a cash payment to a helper, a Zelle to a contractor. Each one is small. Together they can move the profit by thousands.
The closing statement isn't checked against the books. The settlement statement from the sale shows commissions, prorated taxes, and credits. If it never gets recorded line by line, the selling costs are guesses.
How to get the real number on the next one
Give each project its own place in the books from day 1, either its own bank account or its own tag in your accounting software, so every cost is assigned to that property as it happens. Record both closing statements in full. Keep receipts for anything paid outside the project account. When the project closes, the profit and loss for that property is already done.
That per-deal profit and loss is also what your CPA needs at tax time. Profit from flips is often taxed differently than rental income, and your CPA will decide how yours is treated, but they can only work from the numbers you give them.
Where to start
If you have a flip that's closed and you're not sure what it made, that's a good place to begin. Tell us where your books stand and we'll go through it on a short discovery call.
REVI Bookkeeping works with house flippers and long-term rental landlords anywhere in the US.
