Holding costs are the monthly costs you pay while you own the property, before you exit.
Most flip profits die from timeline slip, not from the rehab budget itself.
Every extra week adds interest, utilities, insurance, taxes, and opportunity cost.
If you underwrite holding costs conservatively, your deal survives delays and still wins.
If you underwrite holding costs optimistically, one permit delay can wipe out your margin.
Use the framework below to model holding costs like a professional investor.
At a glance
- Holding costs are predictable if you model them correctly
- Timeline slip is common; build buffers into your underwriting
- Interest is usually the largest monthly holding cost
- Utilities, insurance, and taxes add up faster than people expect
- DOM [Days on Market] is part of holding cost risk
- Conservative underwriting protects profit and reduces financing stress
What counts as holding costs in a flip
Holding costs typically include:
- Financing cost: interest payments (often interest-only), plus any required reserves
- Property taxes: monthly pro-rated cost while you own the property
- Insurance: vacant property or builder’s risk insurance (often higher than owner-occupied)
- Utilities: power, water, gas, trash, internet (if used for cameras/monitoring)
- Maintenance: lawn, pool, snow removal, minor repairs
- HOA [Homeowners Association] dues: if applicable
- Security: alarms, cameras, boarding, lighting
- Selling period costs: staging, listing utilities, small repairs, price reductions, continued interest
The holding cost formula investors should use
Use a simple monthly model:
Monthly Holding Cost = Interest + Taxes + Insurance + Utilities + HOA + Maintenance + Security
Then multiply by your conservative timeline:
Total Holding Cost = Monthly Holding Cost × Months Owned
Key rule: model months owned as:
- rehab time (with buffer) +
- listing prep time +
- DOM [Days on Market] (with buffer) +
- closing period (often 30 days)
Where flips go wrong: timeline assumptions
Most investors underestimate:
- permitting time
- contractor scheduling delays
- inspection rework
- material lead times
- weather interruptions
- appraisal and buyer financing timelines during resale
A “6-week rehab” can become 10–12 weeks quickly. If your deal only works at 6 weeks, it’s not a deal. It’s a hope.
How to underwrite holding costs conservatively (without becoming paralyzed)
Use two scenarios:
- Base case: realistic timeline
- Stress case: timeline + 30 to 60 days
If the deal fails the stress case, fix the structure:
- negotiate purchase price
- reduce scope or complexity
- improve exit pricing realism
- keep more cash buffer
- choose a more liquid neighborhood
- avoid projects where permits are uncertain
Practical holding cost checklist (copy/paste)
Before you buy, write down:
- Interest payment estimate (monthly)
- Taxes (monthly pro-rate)
- Insurance (monthly)
- Utilities (monthly)
- HOA [Homeowners Association] (monthly)
- Maintenance/security (monthly)
- Expected rehab time + buffer
- Expected DOM [Days on Market] + buffer
- Closing time after contract (usually ~30 days)
Next step
Fix & flip program: https://ambitionlending.co/fix-flip-loans/
Hard money program: https://ambitionlending.co/hard-money-loans/
Submit a deal: https://ambitionlending.co/contact/
Frequently Asked Questions
What is the biggest holding cost in a flip?
Interest is usually the largest monthly holding cost, but taxes, insurance, and utilities can be significant, especially on longer timelines.
How much buffer should I add to my timeline?
A conservative buffer is often 30 to 60 days, depending on permitting risk, contractor reliability, and local market liquidity.
Does DOM [Days on Market] count as holding time?
Yes. You pay interest, taxes, insurance, and utilities until the property closes, not until you list.
How do I reduce holding cost risk?
Buy in more liquid neighborhoods, keep scope realistic, use reliable contractors, and underwrite with conservative timelines.
Should I stage the property?
Staging can reduce DOM in many markets, which can reduce total holding cost. Underwrite staging as a cost that may shorten time-to-sale.
What is the most common mistake?
Underestimating timeline slip, then watching holding costs silently eat the margin.
Fix & Flip Loans: https://ambitionlending.co/fix-flip-loans/
Hard Money Loans: https://ambitionlending.co/hard-money-loans/
Contact: https://ambitionlending.co/contact/
