Answers · Investing
How much cash do I really need to flip a house?
More than the down payment. Plan for four buckets: your share of the purchase, closing costs on the way in, the money to carry the project, and the money to float the rehab between draws. The fourth one surprises people, because the lender reimburses rehab work after it is done, not before.
Written by Andrew Malm, Senior Loan Originator, NMLS# 2663426. Last reviewed .
Bucket one is the down payment. Flip lenders fund most of the purchase and most or all of the rehab, and your experience decides how much. A first-time flipper brings more. I will not put a number on a web page, because it changes with the deal and the lender.
Bucket two is closing costs: lender fees, title, insurance, and usually an appraisal or a valuation. Bucket three is carrying costs for every month you own the house: interest, taxes, insurance and utilities. Flips that run long are where the profit goes, so I budget extra months.
Bucket four is the draw float. The lender holds your rehab budget and pays it out in stages, after an inspector confirms the work. Your contractor wants a deposit and progress payments before that money arrives. You need enough cash to bridge the gap, or a contractor who can carry it.
Then there is the cushion. Something behind a wall will cost more than you planned. A flip with no reserve is one surprise away from a stalled project.
What I'd do
- Add up all four buckets before you make an offer, not after.
- Ask the lender how draws work: how many, how fast, and what each inspection costs.
- Budget for the project taking longer than the plan. It usually does.
- Use my fix and flip calculator to see the cash in the deal, not just the profit.
Have a situation that does not fit the article? That is most situations. See your options or text me at 763-373-9360.
One conversation changes the picture.
Seeing your options is free, with no hard credit pull to start.