What are the holding costs for house flipping?

This article was written by our expert who is surveying the industry and constantly updating the business plan for a house flipping business.

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The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the house flipping market.

What monthly property tax amount should I expect during my house flip?

Property taxes for your house flip are calculated based on the assessed value and local tax rates, typically ranging from $175 to $625 per month for a $300,000 property.

In the United States, annual property tax rates vary significantly by location, ranging from 0.7% to 2.5% of the property's market value. For budgeting purposes in your house flipping business, you need to divide the annual tax obligation by 12 months to determine your monthly carrying cost. If you're flipping a property assessed at $250,000 in an area with a 1.2% annual tax rate, you'll pay $3,000 per year or $250 per month.

Some municipalities require quarterly or semi-annual payments, but you should still budget monthly to accurately track your holding costs throughout the renovation period. Check with the local tax assessor's office for the exact rate in your target area, as rates can differ dramatically even between neighboring cities. Properties in Texas, New Jersey, and Illinois typically have higher rates (2%-2.5%), while states like Hawaii and Alabama have lower rates (0.3%-0.7%).

Keep in mind that property taxes accrue daily, and you'll be responsible for the prorated amount from your purchase date until you sell the property. This is one of the many elements we break down in the house flipping business plan.

How much will homeowner's insurance cost me while I hold the property?

Homeowner's insurance for a house flip typically costs $80 to $200 per month, significantly higher than standard owner-occupied policies due to vacancy and renovation risk factors.

Standard insurance companies charge elevated premiums for vacant or under-renovation properties because they present higher risks for theft, vandalism, and undetected damage. Your monthly insurance cost depends on the property's location, value, condition, and coverage limits. A property in a hurricane-prone area like Florida will cost more to insure than one in a low-risk region.

Many house flippers require "builder's risk" or "renovation insurance" policies specifically designed for properties undergoing significant construction work. These policies typically cover the structure, materials on-site, and liability exposure during the renovation phase. Builder's risk insurance usually costs 1%-4% of the total construction budget for the policy term.

To get accurate quotes for your house flipping project, contact insurance agents who specialize in investment properties and explain your renovation timeline and scope. Make sure your policy covers vacant property periods, as standard homeowner's policies often exclude coverage after 30-60 days of vacancy.

What should I budget for utilities during the renovation period?

Utility costs for a house flip range from $125 to $440 per month, covering electricity, water, gas, and waste removal services needed during renovation.

Even if the property is vacant, you'll need active utilities for contractors to work effectively and to prevent issues like frozen pipes or mold growth. Electricity costs typically run $50-$200 monthly depending on climate, property size, and whether power tools and equipment are being used extensively. Water and sewer services cost $30-$100 per month and are essential for construction activities like mixing cement, cleaning, and bathroom/kitchen work.

Gas heating costs range from $25-$80 monthly and become significant during winter renovations when you need to maintain minimum temperatures to protect plumbing and allow materials like paint and adhesives to cure properly. Waste removal services cost $20-$60 monthly, and you may need additional dumpster rentals ($300-$600 per pickup) for construction debris.

Budget toward the higher end of utility ranges if you're renovating during extreme weather months (summer in hot climates, winter in cold regions) or if your renovation involves significant electrical or water-intensive work. Contact local utility providers before purchase to establish service in your business name and get accurate rate estimates for your specific property address.

How much should I allocate for property maintenance and landscaping?

Maintenance and landscaping costs for house flipping typically range from $50 to $250 per month depending on property size, location, and specific upkeep requirements.

Basic lawn maintenance is essential to avoid code violations and maintain neighborhood appearance during your flip. Professional lawn mowing services cost $30-$80 per visit, typically needed bi-weekly during growing seasons. If your property has extensive landscaping, hedges, or gardens, expect monthly costs toward the upper end of the range.

Beyond landscaping, vacant property maintenance includes regular interior and exterior inspections, pest control ($40-$75 per treatment), minor repairs, and keeping the property secure and weatherproof. Properties with pools require additional monthly service ($80-$150), and winter climates may need snow removal services ($25-$75 per event). Set aside funds for unexpected maintenance issues like emergency plumbing leaks, broken windows, or HVAC repairs that could arise during the holding period.

You'll find detailed market insights in our house flipping business plan, updated every quarter.

How do I calculate HOA or condo association fees into my holding costs?

HOA and condo association fees are fixed monthly obligations that range from $100 to $600 and must be paid throughout your entire holding period regardless of property occupancy.

These fees are determined by the homeowners association or condo board and typically cover common area maintenance, amenities (pools, gyms, landscaping), insurance for shared structures, and reserve funds for major repairs. Before purchasing a flip property, request the association's governing documents, current fee schedule, meeting minutes, and financial statements to understand your exact monthly obligation and identify any upcoming special assessments.

Special assessments are one-time charges levied by associations for major projects like roof replacements, parking lot resurfacing, or building envelope repairs. These can range from a few hundred to several thousand dollars and will significantly impact your holding costs if implemented during your ownership period. Review at least 12 months of association meeting minutes to identify any planned special assessments.

Properties with extensive amenities (gated security, concierge services, multiple pools, fitness centers) typically have higher monthly fees ($400-$600+), while basic associations may charge only $100-$200 monthly. Factor these non-negotiable fees into your purchase analysis, as they directly reduce your monthly cash flow and overall profit margin on the flip.

What will my monthly loan interest payments be?

Monthly interest payments represent one of your largest holding costs, ranging from $1,340 to $2,500 for a typical $200,000 hard money loan at 8%-15% annual interest rates.

Hard money lenders and private money sources commonly used in house flipping charge significantly higher rates than traditional mortgages because they fund quickly with minimal documentation and base approval primarily on the property's after-repair value (ARV) rather than your credit score. A $200,000 loan at 10% annual interest costs $1,667 per month in interest alone, adding up to $10,000 over a 6-month flip.

Traditional financing options like conventional mortgages (4%-6% annual interest) or home equity lines of credit offer lower rates but require stronger credit, more documentation, and longer approval times. On a $200,000 conventional loan at 5% annual interest, you'd pay approximately $833 per month. Calculate your specific interest cost by multiplying your loan principal by the annual interest rate, then dividing by 12 months.

Most hard money loans are interest-only, meaning you only pay interest monthly with the principal due at sale or refinance. This structure maximizes your available cash for renovations but creates a balloon payment at the end. Track your daily interest accrual to understand exactly how renovation delays impact your bottom line—each extra week on a $200,000 loan at 10% costs approximately $385 in additional interest.

How do lender fees and extension costs affect my holding expenses?

Lender fees significantly impact holding costs through upfront points (2%-5% of loan amount) and extension fees (0.5%-2% of loan amount) if your flip takes longer than the initial loan term.

Most hard money lenders charge origination fees called "points" at closing—each point equals 1% of the loan amount. A $200,000 loan with 3 points costs $6,000 upfront, which must be factored into your total project costs. While these aren't monthly expenses, they directly reduce your available renovation capital and overall profit.

Extension fees become critical if your renovation or sale timeline exceeds your initial loan term, which is typically 6-12 months for hard money loans. If you need an additional 3 months beyond your original 6-month term, a 1% extension fee on a $200,000 loan adds $2,000 to your costs—equivalent to $667 per month. Some lenders charge extension fees monthly while others require lump-sum payments.

To minimize these costs in your house flipping business, build buffer time into your renovation timeline, maintain constant communication with your lender about progress, and have a backup exit strategy if the property doesn't sell quickly. Some lenders offer better extension terms if you communicate early rather than defaulting on the loan due date. This is one of the strategies explained in our house flipping business plan.

What are the costs for property management or security on vacant flips?

How do I account for opportunity cost in my holding cost calculations?

Opportunity cost represents the returns you're giving up by having capital tied up in your house flip rather than invested elsewhere, typically calculated at 0.42%-0.67% monthly (5%-8% annually).

If you have $100,000 of your own money invested in a flip project, that capital could alternatively be earning returns in stock market index funds (average 8%-10% annually), rental properties (8%-12% annually), or other investment vehicles. At a conservative 6% annual opportunity cost rate, your $100,000 costs you $500 per month in foregone alternative returns.

Calculate opportunity cost by determining your total capital invested (down payment, renovation budget, closing costs) and multiplying by your expected alternative investment return rate divided by 12 months. This helps you understand the true cost of longer holding periods and why speed is essential in house flipping. A 6-month flip with $80,000 invested at 7% annual opportunity cost equals $280 per month or $1,680 total, while extending to 9 months increases the opportunity cost to $2,520.

While opportunity cost doesn't involve actual cash outflow like other holding costs, it represents real economic impact on your wealth-building strategy and should influence your decision-making about which properties to flip, how quickly to renovate, and your minimum acceptable profit margins.

What penalties or fines might I face for holding a vacant property?

Vacant property penalties vary significantly by jurisdiction, ranging from $50 to $300+ monthly in major urban areas, though many U.S. regions don't impose vacancy charges unless the property remains empty for extended periods (6-12+ months).

Cities with tight housing markets or high vacancy rates increasingly implement vacant property registration requirements and associated fees to discourage property speculation and encourage rapid renovation. Cities like Washington D.C., Baltimore, Oakland, and Vancouver require vacant property registration ($100-$250 annually) plus escalating fines if properties remain vacant beyond threshold periods.

Beyond direct vacancy penalties, you may face municipal code violations and fines for unmaintained properties, including citations for overgrown lawns ($50-$200 per violation), exterior deterioration ($100-$500), or unsecured properties. These violations accumulate quickly if you don't maintain the property properly during renovation. Some jurisdictions place liens on properties for unpaid fines, complicating your sale process.

Research your local municipal code before purchasing a flip property to understand vacancy regulations, registration requirements, and maintenance standards. Contact the city's building and code enforcement department to ask specifically about vacant property ordinances and ensure you're in compliance throughout your renovation timeline.

How do renovation delays and permit issues increase my total holding costs?

Renovation delays and permit approval timelines multiply your monthly holding costs by extending the time you're paying for property taxes, insurance, utilities, loan interest, and all other carrying expenses.

If your initial flip timeline was 4 months but permit delays and contractor issues extend it to 7 months, you're paying an additional 3 months of holding costs. On a property with $2,500 in total monthly holding costs, this 3-month delay adds $7,500 to your project budget and directly reduces your profit. Common delay sources include waiting for building permits (2-8 weeks in most jurisdictions), failed inspections requiring rework, material shortages, contractor scheduling conflicts, and unexpected structural issues discovered during renovation.

Permit approval timelines vary dramatically by municipality and project scope. Simple cosmetic renovations may not require permits, while structural changes, electrical work, plumbing modifications, and additions typically need permits and inspections. In high-regulation cities, permit approval can take 6-12 weeks, while smaller municipalities may approve permits in 1-2 weeks. Each week of permit delay costs you interest, utilities, insurance, and lost opportunity on your next project.

Mitigate delay risks by pulling permits immediately after purchase, hiring licensed contractors familiar with local building departments, scheduling inspector walkthroughs proactively, ordering long-lead-time materials early, and building 20%-30% timeline buffer into your projections. Get expert guidance and actionable steps inside our house flipping business plan.

How do I calculate my total monthly burn rate for a house flip?

Calculate your monthly burn rate by listing every holding cost category, assigning realistic dollar amounts based on your specific property and location, then summing all expenses to determine your total monthly cash outflow.

Start with a detailed spreadsheet that includes all fixed costs (property taxes, insurance, HOA fees, loan interest) and variable costs (utilities, maintenance, management fees). For a $300,000 flip property with a $200,000 hard money loan at 10% interest, your monthly burn rate calculation might look like this: property taxes $300, insurance $150, utilities $300, maintenance $150, loan interest $1,667, totaling $2,567 per month before any renovation expenses.

Include one-time costs by dividing them across your anticipated holding period. If you paid $6,000 in loan origination points and expect a 6-month flip timeline, add $1,000 per month to your burn rate calculation. Build in contingency buffers for unexpected costs and timeline extensions—most experienced flippers add 20%-30% to their projected holding costs to account for delays and unforeseen expenses.

Update your burn rate calculation monthly as actual costs come in and your timeline shifts. This allows you to make informed decisions about whether to invest more in faster renovations (reducing holding time) or accept longer timelines. Track your cumulative holding costs against your projected profit margin weekly to ensure the deal remains profitable and identify problems early before they eliminate your profit entirely.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.