Flipping Math Confusion

[Kat Hussey]

If I buy a house for 50k, put 100k into rehab, then sell it for 200k with 6% agent commission, do I actually make a profit? Or do I just get back my original 30k?

Deal:

Money Out of Pocket: 30k (rest is financed)

Buy: 50k with 5000 closing costs

Rehab: 100k roughly based on my estimates

Sale: 200k and 12k commission

[Alex Fortsch]

No, you would theoretically profit ±$33k. The math would look like this:

*Note* These numbers are very simplistic. A full analysis should include (And you may be on your $100k estimate) holding costs such as Interest, Taxes, Insurance, Utilities, etc. There will likely be more than just the $12k in commissions due at closing - Safe to assume some seller closing credits, updating the abstract, etc., and don;t forget about Income Taxes on the flip at the end of the year!

Nonetheless, you numbers above would look like this:

$55,000 - Purchase price, including $5K closing costs

$30,000 - Down payment

$25,000 - 1st Loan

$100,000 - 2nd Loan - Not sure how you structure your financing, but I'm assuming this money is borrowed as well.

$125,000 - Total debt on the property

$200,000 - Sales price

$12,000 - Commissions

$188,000 - Sale Proceeds

$63,000 - Check from closing ($188k, less the $125k debt)

$33,000 - Profit ($63k, less your initial $30k down payment)