Startup costs for a 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 is the typical purchase price range for properties suited for flipping in today's market?

Properties suitable for house flipping in 2025 typically range from $150,000 to $350,000 across most markets.

The lower end of this range ($150,000-$200,000) represents opportunities in emerging neighborhoods, smaller cities, or properties requiring extensive renovation work. These properties often offer higher profit margins but may require more significant investment in repairs and updates.

Mid-range properties ($200,000-$300,000) are commonly found in established suburban markets and represent the sweet spot for many house flippers. These properties typically need cosmetic updates and moderate renovations, making them ideal for beginners in the house flipping business.

Higher-priced properties ($300,000-$350,000) are located in desirable neighborhoods or major metropolitan areas where property values support premium pricing. While these require larger capital investments, they often yield higher absolute profits when executed properly.

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

How much capital is generally required upfront for the down payment and closing costs?

House flippers typically need 20-25% of the property purchase price as a down payment, plus an additional 5-6% for closing costs.

For a $200,000 property, this translates to $40,000-$50,000 for the down payment and $10,000-$12,000 for closing costs, totaling $50,000-$62,000 in upfront capital. Investment properties often require higher down payments than primary residences, with some lenders requiring 25% minimum.

Closing costs include inspection fees, appraisal costs, loan origination fees, title insurance, and attorney fees. These costs are generally non-negotiable and must be paid in cash at closing.

Some experienced house flippers use alternative financing strategies like hard money loans or private lenders, which may have different down payment requirements but typically charge higher interest rates and fees.

This is one of the strategies explained in our house flipping business plan.

What are the average renovation costs per square foot for a standard flip, broken down by major categories?

Renovation costs vary significantly by project scope and location, with kitchen and bathroom renovations commanding the highest per-square-foot costs.

How should carrying costs such as utilities, insurance, and property taxes be estimated on a monthly basis?

Monthly carrying costs for house flipping properties typically range from $500 to $2,000, depending on property size, location, and local tax rates.

Property taxes represent the largest component, averaging $150-$300 monthly in most markets but can reach $500-$800 in high-tax areas like New Jersey or Texas. Insurance costs typically run $100-$200 monthly for basic coverage, though vacant property insurance may cost 50-100% more than standard homeowner's insurance.

Utility costs vary based on property size and usage patterns. During active renovation, expect $200-$400 monthly for electricity, gas, water, and waste services. Properties being staged or shown to buyers require climate control and lighting, increasing utility expenses.

Additional carrying costs include HOA fees ($50-$300 monthly), security systems ($30-$100 monthly), and lawn maintenance ($100-$300 monthly). These costs accumulate quickly, making project timeline management critical for profitability.

We cover this exact topic in the house flipping business plan.

What are the usual financing options available for house flippers, and what are the typical interest rates, fees, and required reserves?

House flippers primarily use hard money loans, business lines of credit, and private lenders for financing, each with distinct terms and requirements.

How much should be set aside for contingency funds in case of unexpected repairs or delays?

Industry experts recommend setting aside 10-15% of your total renovation budget as a contingency fund for unexpected repairs and project delays.

For a typical $50,000 renovation budget, this means reserving $5,000-$7,500 for unforeseen expenses. More extensive renovations requiring $100,000-$150,000 should have $10,000-$22,500 in contingency reserves.

Common unexpected expenses include structural issues discovered during demolition, outdated electrical or plumbing systems requiring upgrades, environmental hazards like asbestos or lead paint, and permit delays that extend carrying costs. Foundation problems, roof leaks, and HVAC system failures represent the most expensive surprise repairs.

Experienced house flippers often allocate contingency funds based on property age and condition. Properties built before 1978 require larger contingencies due to potential lead paint and asbestos issues. Homes over 50 years old typically need 15-20% contingency funds due to aging infrastructure.

It's a key part of what we outline in the house flipping business plan.

What are the common legal, licensing, and permitting fees associated with renovations, and how much do they usually cost?

Legal, licensing, and permitting fees for house flipping renovations typically range from $1,000 to $5,000 per project, depending on renovation scope and local requirements.

Building permits represent the largest expense, costing $500-$2,000 for standard remodeling projects. Major renovations involving structural changes, electrical upgrades, or plumbing modifications may require permits costing $2,000-$5,000 or more.

Inspection fees add $200-$500 per required inspection, with most projects requiring 2-4 inspections throughout the renovation process. Electrical and plumbing work typically require separate permits and inspections, each costing $150-$400.

Some jurisdictions require general contractor licenses for property flippers, costing $200-$1,000 annually plus bonding and insurance requirements. Professional certifications from engineers or architects may be needed for structural modifications, adding $500-$2,000 to project costs.

Get expert guidance and actionable steps inside our house flipping business plan.

What are the typical costs for hiring contractors, inspectors, and project managers, and how do these differ between markets?

Contractor costs typically represent 10-20% of total renovation expenses, with significant variation between metropolitan and rural markets.

General contractors charge 10-20% of project costs as management fees, with higher percentages in competitive markets like San Francisco or New York. In smaller markets, contractors may work for 10-15% margins, while major metropolitan areas command 15-20% or higher.

Project managers charge $1,500-$2,000 flat fees for smaller renovations or 10-15% of total project costs for extensive renovations. Many offer performance bonuses for early completion, typically 1-3% of project value. Experienced project managers in high-cost markets may charge $3,000-$5,000 flat fees.

Inspector fees vary by market and inspection type. Standard home inspections cost $300-$500, while specialized inspections for structural, electrical, or environmental issues cost $400-$800 each. Major markets typically charge 20-50% more than smaller cities for professional services.

Skilled tradespeople command premium rates in tight labor markets, with electricians and plumbers charging $75-$150 per hour in major metros compared to $50-$100 in smaller markets.

How much should be budgeted for staging, photography, and marketing the property once renovations are complete?

Staging, photography, and marketing expenses typically range from $2,500 to $7,000 per property, representing 1-2% of the expected sale price.

• Physical staging costs $1,500-$5,000 for full house staging, with monthly rental fees of $400-$600 per room for furniture and accessories
• Virtual staging offers a cost-effective alternative at $300-$500 for digitally staging an entire house using professional photography
• Professional photography services cost $300-$600 for high-quality listing photos, including aerial drone shots and virtual tours
• Marketing campaigns including online listings, social media promotion, and print materials typically cost $500-$2,000
• Additional marketing tools like 3D virtual tours or video walkthrough cost $200-$800 depending on property size and complexity

What are the real estate agent commissions, transaction fees, and closing costs when selling the property, and how should these be calculated?

Total selling costs typically range from 6-9% of the property's sale price, including real estate commissions and various transaction fees.

Real estate agent commissions represent the largest selling expense at 5-6% of sale price, typically split between listing and buyer's agents. On a $300,000 sale, this amounts to $15,000-$18,000 in commission costs.

Seller's closing costs add another 1-3% of sale price, including title insurance, escrow fees, transfer taxes, and attorney fees. These costs vary significantly by state, with some states charging minimal transfer taxes while others impose 1-2% of sale value.

Additional selling expenses include property taxes prorated to closing date, HOA fees, utility bills, and any required repairs identified during buyer inspections. Home warranties or seller concessions may add $500-$3,000 to selling costs depending on buyer negotiations.

This is one of the many elements we break down in the house flipping business plan.

How long does a standard flip project usually take from purchase to resale, and how does this timeline affect the overall budget?

Standard house flipping projects typically require 4-6 months from purchase to resale, with extensive renovations potentially taking 10-14 months to complete.

The timeline directly impacts carrying costs, which accumulate at $500-$2,000 monthly throughout the project duration. A 6-month project incurs $3,000-$12,000 in carrying costs, while extended 12-month projects may cost $6,000-$24,000 in holding expenses.

Project phases typically break down as follows: acquisition and planning (2-4 weeks), permit approval (2-6 weeks), renovation work (8-16 weeks), staging and marketing (2-4 weeks), and closing process (4-6 weeks). Permit delays and contractor scheduling often extend timelines beyond initial estimates.

Financing costs also compound with longer timelines, as hard money loans and private financing charge interest monthly. A 12% annual interest rate on a $200,000 loan costs $2,000 monthly, making timeline management critical for maintaining profit margins.

What are the current local and federal taxes that apply to profits from house flipping, and how should they be factored into total startup costs?

House flipping profits are typically taxed as ordinary income at federal rates ranging from 20-40%, plus applicable state and local taxes.

Properties held less than one year are subject to short-term capital gains treatment, meaning profits are taxed at ordinary income rates rather than preferential long-term capital gains rates. For high-income earners, this can result in federal tax rates of 32-37% plus the 3.8% net investment income tax.

State income taxes vary significantly, with some states like Florida and Texas imposing no state income tax, while states like California and New York charge 8-13% on investment income. Local transfer taxes and recording fees add 0.5-2% of sale price in many jurisdictions.

Self-employment taxes may also apply if house flipping is conducted as a business rather than investment activity. This adds 15.3% in Social Security and Medicare taxes on profits, though legitimate business expenses can reduce taxable income.

Successful house flippers should reserve 25-45% of expected profits for tax obligations, depending on their total income level and state residence. Quarterly estimated tax payments are typically required to avoid penalties.

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.

Sources

1. Anytime Estimate - Down Payment Guide
2. HomeGuide - House Remodeling Costs
3. Gatsby Investment - How to Flip Houses
4. Aqua Kitchen - Home Renovation Costs
5. RESimpli - Loans for Flipping Houses
6. VM Power Construction - Renovation Cost Guide
7. The Close - Cost to Flip a House
8. FlipperForce - Calculating Holding Costs
9. Construct Elements - House Flipping Costs
10. eFunder Capital - Fix and Flip Loans