Overview
Holding costs, also called carrying costs, are the ongoing expenses you pay to own a property while you rehab and sell it: property taxes, insurance, utilities, and maintenance. They typically run $500 to $1,000 per month on a single-family flip. Total Holding Costs = Monthly Holding Costs x Holding Period.
Key Takeaways
- Holding costs, also called carrying costs, are what you pay to own a property during the project: property taxes, insurance, utilities, maintenance, and HOA dues.
- They typically run $500 to $1,000 per month on a single-family flip.
- The formula is simple: Total Holding Costs = Monthly Holding Costs x Holding Period (in months)
- The average flip takes 4 to 5 months from possession to final closing. If you are not sure, use 4 to 6 months and move on.
- Financing costs (your loan points and interest) are tracked separately, not as holding costs.
- Holding costs are the one cost tied directly to your timeline. Every week the project runs long, this number grows.
FAQ
What are Holding costs?
Holding costs (also known as carrying costs) are the monthly costs you incur while you are holding the property, such as property taxes, insurance, utilities, and maintenance costs.
They start the day you take possession and do not stop until the sale closes. That makes them different from every other cost on a flip: your rehab budget is fixed by the scope of work, but your holding costs are decided by the calendar.
Total Holding Costs = Monthly Holding Costs x Holding Period (in months)
Holding Costs vs. Carrying Costs: Is There a Difference?
No. Holding costs and carrying costs are two names for the same thing. You will hear both used interchangeably by investors, lenders, and accountants, and neither one means anything different from the other.
Some investors use "carrying costs" a little more broadly to include their loan interest, while others keep financing separate. What matters is not which word you use, but that you count every recurring cost of owning the property once and only once in your deal analysis.
FAQ
What are the typical Holding costs & amounts I can expect to pay?
Typical Holding Costs
Here's a list of typical Holding Costs and average amounts that you will likely have on your rehab projects.
- Property Taxes - Property taxes will vary depending on your local property tax rates. To find the property tax amount for a property you can search your local county assessor's website.
- Property Insurance ($100 to $150/month) - You will need to get a Vacant Property Insurance which will cover loss of the property and provide liability insurance for a few hundred $ per month.
- Utilities ($200 to $350/month) - For utilities, think about how much you pay for your own personal residence in utilities. Generally, in the Kansas City area you will have around $200 to $350/month in utilities depending on the season.
- Maintenance ($50 to $100/month) - Maintenance costs include any kind of on-going property maintenance such as lawn mowing or snow removal.
- HOA Dues - If your property has a Home Owner's Association, you will likely have Annual HOA dues for the property. Generally, you can find HOA information on the property listing or the neighborhood's website.
What Is Not a Holding Cost
This trips people up constantly, and double-counting a cost will throw off your whole analysis. These are all real costs on a flip, but they are not holding costs:
- Financing costs, meaning the points and interest on your loan. These are also monthly, which is why people lump them in, but they belong in their own line so you can see what your money is actually costing you.
- Buying costs, like title work and closing fees. One-time, paid at purchase.
- Selling costs, like agent commissions. One-time, paid at the sale.
- Rehab costs, the actual construction work.
Keep each in its own bucket and your
Maximum Purchase Price calculation stays clean.
FAQ
how long does it typically take to rehab a property?
Holding Period
A typical rehab project timeline is as follows:
| Phase |
Typical duration |
| Purchase closing (take possession) |
Day 0 |
| Planning, permits, bidding |
1 week to 1 month+ |
| Rehab / construction |
2 weeks to 4 months |
| Listing for sale |
1 week to 2 months |
| Closing the sale |
1 to 2 months |
| Total holding period |
2 to 3 months best case, 4 to 5 months average |
- Planning, Permits, Bidding (1 week to 1 month+) - If possible, you will try to start the planning before the closing to gain a head start. The planning process can take as little as 1 week or as long as 2 months if you have large project that requires plans, plan review, & permitting.
- Rehab/Construction (2 weeks to 4 months) - For a cosmetic rehab, the project may only take a few weeks, but for a larger 'gut job' it could take up to 4 months.
- Listing for Sale (1 week to 2 months) - In a hot seller's market in a desirable area, you may have an offer the 1st day you put the property on the market. In a buyer's market, your property could sit for 1 to 2 months before you get an offer.
- Closing (1 to 2 months) - Once you get an offer under contract, it generally takes around 30 to 60 days to process the closing.
In a best case scenario, with a cosmetic rehab that sells quickly, you are looking at a holding period of 2 to 3 months. Overall, the average rehab will likely take around 4 to 5 months.
PRO TIP
Don't overthink or over analyze your project timelines. Holding Costs (excluding financing) for utilities, taxes, & insurance are typically only $500 to $1000 per month. If you under-estimate your timeline by 1 to 2 months, it will only cost you a few thousand bucks in Holding Costs...In the scheme of things you should be much more concerned about accurately estimating your big numbers such as your ARV and Rehab Costs. When in doubt, just use 4 to 6 months for your holding period and move on to calculating the big numbers..
Holding Costs Example
Let's run through a quick example of how to calculate your holding costs for an average rehab that takes about 5 months from taking possession to final closing.
In the table below, the monthly holding cost is multiplied by the holding period to calculate the total.
| Holding Costs (5 Months) |
$/Month |
Amount |
| Property Taxes |
$125 |
$625 |
| Property Insurance |
$125 |
$625 |
| Utilities |
$275 |
$1,375 |
| Maintenance |
$80 |
$400 |
| Total Holding Costs |
$605 |
$3,025 |
In this example, we are spending $605 a month on holding costs during the 5 months of ownership, which amounts to $3,025 in total holding costs.
Now run the same deal at 8 months instead of 5, because permits dragged and the house sat on the market:$605 x 8 = $4,840
That is $1,815 of profit gone, and nothing about the property changed. It just took longer.
How to Reduce Your Holding Costs
Holding costs are the one line on your analysis you can shrink through execution rather than negotiation. A few ways to do it:
- Do your planning before you close. Line up your scope of work, contractor bids, and permits during the contract period so work starts the week you take possession, not a month later.
- Order long-lead materials early. Cabinets, windows, and specialty finishes are the items most likely to stall a job. Order them before you need them.
- Keep the trades sequenced. A project schedule that keeps contractors from tripping over each other is worth more than any single cost you could negotiate down.
- Start marketing before you finish. You do not have to wait until the final punch list is done to list the property and start showings.
- Price it right the first time. A property that sits for two months and then takes a price cut costs you the holding costs and the discount. Pricing to your comps from day one is cheaper than chasing the market down.
- Drop utility service to the minimum. You need power and water for the crews, but you may not need every service running at full rates for the whole project.
Know Your Max Offer Before You Make It
To analyze your deals efficiently and systematically you may want to consider building your own
deal analysis spreadsheet or utilizing a pre-built software like our Flipper Force software.
Our Flipper Force software has a
House Flipping Calculator tool that is pre-built with a step-by-step process to help you can calculate your Buying Costs, Holding Costs, Selling Costs & Financing Costs for your projects.
Having a system in place will ensure that you don't miss any costly items in your analysis so you make the right offer for your property!
Learn more about our
House Flipping Calculator
Frequently Asked Questions
What are holding costs in real estate?
Holding costs are the ongoing expenses you pay to own a property while you rehab and sell it, including property taxes, insurance, utilities, maintenance, and HOA dues. They start when you take possession and stop when the sale closes.
Are holding costs and carrying costs the same thing?
Yes. Holding costs and carrying costs are two names for the same expenses. Investors, lenders, and accountants use both terms interchangeably.
How much are holding costs on a house flip?
On a typical single-family flip, holding costs run $500 to $1,000 per month, not counting financing. Over an average 4 to 5 month project, that works out to roughly $2,500 to $5,000 in total.
How do you calculate holding costs?
Add up your monthly costs for property taxes, insurance, utilities, maintenance, and HOA dues, then multiply by the number of months you expect to own the property. Total Holding Costs = Monthly Holding Costs x Holding Period.
Do holding costs include mortgage or loan interest?
Usually not. Most investors track loan points and interest separately as financing costs, so they can see what their capital is costing them apart from the cost of owning the property. What matters most is that you count each cost once and do not double up.
How long should I budget for my holding period?
The average flip takes 4 to 5 months from possession to closing. A quick cosmetic rehab in a hot market can be 2 to 3 months, while a gut job in a slow market can run much longer. If you are unsure, use 4 to 6 months in your analysis.
