Tim Bell breaks down fix-and-flip costs using a 10% rule of After Repair Value, though it shifts based on how you finance and sell. Hard-money lenders and agent commissions can push costs to 6-8% of ARV, while using personal funds and selling without an agent can drop it to 8-9%.
One last thing I want to talk about there, okay? Because these costs can be variable initially, when we're analyzing a property, I suggest you consider using about 10% of the after repair value. That's fine, but you have to understand, if you think about it logically, if, let's say, for example, you use an expensive hard money lender and you use an agent that's going to charge you a 6 or 7 or an 8% commission, okay, obviously it could go up above 10%. On the other hand, if you're using your own money and you're going to sell the property yourself without an agent, it could be below 10%. It could be 9 or 8% of ARV. Okay? So again, it can be adjustable based on your particular individual circumstances as a fix and flip investor. Okay? For our purposes, for our initial analysis purposes, we're going to use 10% because that works for a lot of different properties and it can work for a lot of different people too. Okay? So that's what we're going to use for right now is 10% of the ARV. But you have to realize it is just a guideline. It's just a rough idea of where you're going to be as far as those general costs are concerned.
