How to Calculate Return on Investment for a Flip

Return on Investment (ROI) for a fix-and-flip project can be calculated multiple ways, and the method you use should match the question you're asking. Different metrics reveal different aspects of a deal's profitability.

Simple ROI measures total profit as a percentage of total investment. Formula: (Sale Price − Total Costs) ÷ Total Costs × 100. If you sell for $300,000 and your total costs (purchase, renovation, holding, closing) were $240,000, your profit is $60,000 and your ROI is 25%. This is straightforward but doesn't account for time.

Cash-on-Cash Return measures profit as a percentage of your actual cash invested — not total project cost. If you used a $180,000 hard money loan and invested $60,000 of your own cash, and your profit was $60,000, your cash-on-cash return is 100%. This metric is more relevant because it shows how hard your capital is working.

Annualized ROI accounts for time. A 25% return in 4 months is far better than 25% in 12 months. To annualize, multiply your ROI by (12 ÷ months held). That 25% in 4 months annualizes to 75%; in 12 months, it's still 25%. Use annualized ROI to compare opportunities with different timelines.

Internal Rate of Return (IRR) is the most sophisticated measure, accounting for the timing of all cash flows. It's the discount rate that makes the net present value of all cash flows equal to zero. IRR is particularly useful for comparing flip opportunities against other investments.

Professional flippers track all four metrics across their portfolio. Over time, patterns emerge — which neighborhoods, property types, and renovation levels produce the best returns? This data informs future acquisition strategy and drives continuous improvement in deal selection.