How to estimate closing costs when flipping investment properties.

Flipping houses can be one of the most rewarding real estate investment strategies, but your profits depend on careful budgeting. Many new investors focus on the purchase price and renovation costs while overlooking a key factor that can eat away at their margins: closing costs.

When you’re buying an investment property to flip or selling a finished project, closing costs are unavoidable. But by estimating them correctly, it’s easier to make smarter buying decisions and avoid financial surprises when it’s time to sell.

Let’s break down common closing costs and how to calculate them accurately, as well as go over a few strategies to reduce their impact on your bottom line.

What are closing costs?

Closing costs are the fees and expenses paid to finalize a real estate transaction, separate from the property’s purchase price. Both buyers and sellers have their share of these costs, and the amounts can vary based on things like location, financing, and property type.

On average, closing costs range between 2%–5% of the property’s purchase price, according to Redfin. That means a $200,000 fix-and-flip could come with $4,000 to $10,000 in closing fees before a single repair is made.

Typical closing costs when buying an investment property

When purchasing a house to flip, you’ll likely encounter these costs:

• Loan origination fees: Charged by your lender for processing your loan, typically 0.5%–1% of the loan amount.
• Appraisal and inspection fees: Required to assess value and property condition. Expect to pay around $950 for combined services, according to Angi.com.
• Title search and title insurance: Ensures clear property ownership. Expenses can range from a few hundred to over a thousand dollars.
• Escrow fees: Paid to the escrow company for handling the transaction.
• Recording fees and transfer taxes: Local fees for recording the deed and transferring ownership.
• Notary fees: Required in some states.

If you’re paying cash, you can avoid some financing-related costs like origination fees, but title and transfer expenses still apply.

Closing costs when selling a flipped property

On the selling side, expenses can be even higher, especially when using real estate agents. Common costs include:

• Agent commissions: Historically 5%–6% of the sale price.
• Title and escrow fees: Sellers typically cover a portion of these.
• Transfer taxes: Vary by state or municipality.
• Outstanding liens or HOA fees: Must be settled before the sale closes.
• Repairs and concessions: Buyers will often negotiate credits for inspection issues.
• Attorney fees: In states where attorneys handle closings.

It’s critical to factor these into your flip budget. Forgetting to account for commissions or repair credits can dramatically reduce your profit.

How to accurately estimate costs before you buy

It’s important to estimate closing costs before you purchase. Here’s how to get it right:

• Study local comps: Research recent comparable property sales to see what typical closing costs look like in your area.
• Get quotes from title and escrow companies: They’ll provide fee breakdowns specific to your market.
• Factor in location-specific costs: Highly regulated or urban areas often carry higher fees.

You may want to utilize spreadsheets or software to compare projected costs to actual costs on every deal. Over time, you’ll develop more precise estimates and reduce the risk of surprises.

Pro tips for reducing closing costs

While closing costs are part of doing business, savvy investors know how to minimize them. You could:

• Negotiate repeat-investor discounts: Title and escrow companies may lower fees for high-volume clients.
• Work with discounted-commission agents: Or consider selling off-market to avoid commissions altogether.
• Time your sales strategically: Closing at the end of the month can reduce prepaid interest.
• Build relationships with lenders: Some may waive certain fees if you bring consistent business.

These small adjustments can add thousands back into your profit margins across multiple flips.

Why accurate closing cost estimates matter for house flippers

Closing costs aren’t just line items. They directly impact your return on investment. Underestimating them can quickly turn a promising flip into a break-even project. The more experience you gain, the better you’ll get at projecting and controlling these expenses.

For real estate investors, especially those flipping multiple houses per year, mastering cost estimation is a skill that separates consistent profit-makers from those constantly scrambling to cover surprises.

Take your house flipping to the next level with HomeVestors®

Even when you have a firm grasp on investment property closings, estimating costs accurately is just one part of running a successful fix-and-flip business. The real challenge? Finding enough quality investment properties to make your business sustainable.

That’s where HomeVestors® comes in. As a HomeVestors franchisee, you’ll gain:

• Access to motivated sellers through proven direct marketing strategies, without chasing leads.
• Financing options and resources to support your purchases and renovations.
• Mentorship and training from experienced real estate investors who know the challenges you face.

With HomeVestors, you’ll have the systems, support, and steady deal flow you need to flip confidently and profitably. Get the backing of a trusted national brand with decades of credibility and thousands of successful property transactions across the continental United States.

Thinking about taking your real estate investing to the next level? Consider becoming a HomeVestors® franchisee today. Join a community of investors who’ve been where you are and can help you flip smarter, not harder.

Each franchise office is independently owned and operated.