There’s a saying among seasoned flippers: “You don’t lose money in the sale, you lose it in the numbers.”

And they’re right.

You can buy in a hot neighborhood, nail the rehab, and still walk away with a fraction of the profit you expected… because the numbers didn’t work in your favor from the start.

That’s why a solid flip pro forma, and the ability to stress-test your margins before you close, isn’t optional. It’s the foundation of every profitable flip.

In this guide, we’ll walk you through:

• What a real flip pro forma should look like (with line items most newbies forget)

• How to test your margins against real-world volatility

• The critical stress points that separate flops from winners

• Tools and formulas to run the numbers like a lender

Let’s start with the foundation.

What Is a Flip Pro Forma?

A pro forma is a financial projection. In flipping, it’s a model of how your project should perform, from purchase to resale. It includes revenue, costs, timelines, and projected returns.

Think of it like your pre-game strategy. If you don't know your margins before you demo a wall, you're flying blind.

Sample Flip Pro Forma (Basic Structure)

Let’s break down a sample deal, assuming the following baseline:

• Purchase Price: $160,000

• Rehab Budget: $40,000

• ARV (After Repair Value): $270,000

• Timeline: 4 months

Here’s how the basic flip pro forma might look:

Acquisition

• Purchase Price: $160,000

• Closing Costs (Buyer Side): $4,000

• Title, Escrow, Inspections: $2,000

• Total Acquisition Cost: $166,000

Rehab & Carrying Costs

• Rehab Budget: $40,000

• Permit Fees: $1,500

• Insurance (4 months): $800

• Utilities (Electric/Water/Gas): $600

• Property Taxes (4 months): $800

• Loan Interest (Hard Money, 10%): $5,333

• Total Holding Costs: $49,033

Disposition Costs

• Agent Commission (6% of $270K): $16,200

• Closing Costs (Seller Side): $3,000

• Staging & Cleaning: $1,000

• Total Selling Costs: $20,200

Total Project Cost

• Acquisition: $166,000

• Holding: $49,033

• Disposition: $20,200

• Total Cost: $235,233

Projected Net Profit

• ARV: $270,000

• Minus Total Cost: $235,233

• Projected Profit: $34,767

That’s a 12.9% margin on the ARV, or about a 21% return on cost.

Sounds good? Maybe. But now let’s stress test it.

Stress-Testing Your Flip: What Could Go Wrong?

A $35K profit looks solid on paper until the real world hits.

What If Rehab Runs Over Budget?

Even a 10% overage on your $40K rehab means:
+$4,000 in extra costs
Plus extended holding time = higher interest, taxes, and insurance
Profit drops to ~$28,000

What if ARV Falls by 5%?

If the resale market softens and your ARV drops to $256,500:
Agent commission drops slightly
But so does gross revenue
Now your net profit is ~$21,000

What If You Sit on the Market for 3 Extra Weeks?

Add 3 weeks to your holding time:
Loan interest rises
Taxes, insurance, and utilities increase
Carrying costs go from $49K to ~$51K
Profit could drop another ~$2K

What if the Buyer Negotiates a $7K Credit?

Between inspections and lender requirements, a $7,000 price reduction or credit is common:
That comes directly out of your profit
You’re now looking at ~$14K profit, or a 5.2% return on ARV

That’s not great.

Realistic Profit Thresholds for Flippers

Before you ever close, your pro forma should aim for at least:

• Minimum 20% return on total cost

• Minimum $25,000 net profit buffer

• Minimum 10% ARV margin

Why?

Because every flip gets hit by unexpected costs, slower markets, flaky contractors, or buyer demands. And if your margin can’t absorb a few punches, it’s not a deal.

10 Line Items Most New Flippers Forget

Here’s where rookies lose money fast, by forgetting these key costs in their pro forma:

• Permit fees

• Insurance (especially during vacancy)

• Staging costs

• Final cleaning or junk haul-off

• Post-repair pest control

• Seller-paid credits

• HOA transfer fees or dues

• Transfer taxes

• Final utility shut-off overlap

• Price adjustments after buyer inspection

Any one of these can knock a few grand off your margin. Combined, they’re often fatal.

How to Build a “What If” Margin Test

Stress testing means plugging in conservative scenarios.

Here’s how to do it:

1. Build your standard pro forma

2. Duplicate the spreadsheet and rename it “Stress Test”

3. Apply the following pressure variables:

   1. Rehab +15%

   2. ARV –5%

   3. Holding time +45 days

   4. Buyer requests $7,500 credit

4. See if your profit is still >$20K

5. If not, renegotiate or walk

This quick test simulates a real-world imperfect outcome. If you’re only profitable when everything goes perfectly, you’re not ready to flip.

How Lenders Underwrite Flip Deals (And Why You Should Too)

Hard money lenders are not your friends, but they’re great at underwriting risk.

Here’s what they evaluate before approving your deal:

• Loan-to-ARV (Max 70%)

• Loan-to-Cost (Max 90%)

• Exit strategy viability

• Borrower experience

• Timeline feasibility

• Market comp reliability

You should underwrite yourself the same way, and only fund deals where you’d lend to yourself.

Don’t Forget Taxes on Your Profit

That $35K profit? Uncle Sam wants his cut.

If you flip in an LLC or as a sole prop, expect 15%–37% ordinary income tax
After taxes, your $35K could be closer to $24K–$28K
Meaning your post-tax margin may be 9% or less

Build that into your stress test, especially if you’re flipping more than one house a year.

Tools for Building Pro Formas

You don’t need expensive software to run your numbers. Start with these:

Google Sheets / Excel – Customizable, easy to duplicate for stress tests
Flipster / Rehab Valuator – More automated, but less flexible
PropStream Comp Reports – Plug ARV into your spreadsheet
Your phone’s calculator + Notion – For quick deal vetting on the go

Make sure every deal you evaluate goes through a standardized template, not napkin math.

What Experienced Flippers Do Differently

Most new flippers run one pro forma per deal.

Experienced flippers run three:

1. Base Case – Their best estimate

2. Worst Case – Stress test with lower ARV, longer hold, higher rehab

3. Best Case – For upside scenarios (rare)

Then they only proceed if the worst-case scenario is still profitable.

They don’t just ask, “Can I make money?” They ask: “If everything goes wrong, will I lose money?”

That’s how pros stay in the game.

Final Margin Guardrails for Smart Flipping

Before you ever make an offer, run this checklist:

• Do I have at least 10% ARV spread after all costs?

• Will I clear $25K+ net profit after closing costs and credits?

• If I go 6 weeks over schedule and 15% over rehab, will I still profit

• Have I included every fee, tax, and holding cost in my model?

• Have I tested my numbers at multiple resale price points?

• Have I budgeted for buyer demands after inspection?

If you can answer yes to all six, you’re in a strong position.

If not, adjust your offer or walk away.

Summary: Flipping Is Math First, Hammer Second

The best flippers are spreadsheet warriors before they’re drywall warriors.

They know the real profit happens before they ever buy the house.

A proper pro forma, combined with ruthless stress testing, is what makes the difference between a profitable project… and a painful lesson.

So don’t just trust your gut. Trust your numbers.

Run the math. Test the worst-case. And only then, start the flip.