The direct answer
Flip profit is the dollar surplus after modeled project costs. Flip ROI divides that surplus by the selected capital basis. A larger profit can coexist with a smaller ROI if the project requires much more capital.
Make the dollar bridge visible
Expected sale price less pre-sale costs and sale costs gives profit. The project may require substantial capital even when the final surplus is positive. Show purchase, rehab, acquisition, holding and financing costs separately before consolidating them. Changes in sale price can also change percentage selling fees, so the profit response is not always dollar-for-dollar.
To apply the approach to an editable scenario, use the House Flipping Calculator. For the neighboring question, explore Cash-on-Cash Return Calculator.
Specify the ROI denominator
The linked calculator uses capital spent before sale: purchase, rehab, buying, holding and financing costs. Selling costs reduce profit but are not added to that particular denominator. This is a defined project ratio, not a leveraged cash-on-cash return. If another comparison uses only equity contributed, the percentages are answering different questions and should not be ranked as equivalent.
Keep time and risk outside an unstated formula
A project ROI is not automatically annualized. Two projects earning the same percentage in different holding periods tie in this simple metric but not necessarily in a timed cash-flow analysis. Large capital needs, uncertainty and transaction timing require another layer of review. Do not multiply one project’s result into a repeated annual guarantee.
Worked example
The default flip scenario generates $26,000 profit on $342,000 pre-sale capital, or 7.60%. A separate hypothetical project with $40,000 profit on $800,000 capital has a larger dollar profit but only 5% ROI on that basis. The percentage difference reflects the scale of capital as well as profit.
Common mistakes and limitations
Comparing a full-project ROI with a leveraged equity return or an annualized rate creates an inconsistent ranking. State the period and capital basis beside the percentage.
Does not estimate construction quantities or guarantee ARV/sale price. Taxes are excluded unless user includes them in costs.
Frequently asked questions
Can two flips have equal ROI and different profits?
Yes. Scaling profit and the defined capital basis proportionally leaves the percentage unchanged.
Does the calculator annualize flip ROI?
No. It reports profit divided by pre-sale capital for the entered project.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
Read our editorial policy for the scope of these educational methods.