The real profit on a flip
A flip looks simple (buy low, improve, sell high) but the gap between purchase and sale price is not the profit. Stamp duty, legal and survey fees, finance costs, months of insurance and utilities on an empty property, the agent's fee and conveyancing on the sale all come out of it. On a modest deal those costs can easily consume a third or more of the headline margin.
The calculator adds every one of them, so you can see the profit that's actually left and decide whether it's worth the risk and the months of work.
Why the contingency matters
Refurb budgets overrun far more often than they come in under. The calculator adds a contingency percentage on top of the refurb budget and includes it in both the project cost and the cash you need. If the deal only works with no contingency, it probably doesn't work.
Time is the other variable. Every extra month adds finance interest and holding costs, so a delayed sale erodes profit even if the sale price holds up. Try the deal with a longer project term to see how sensitive it is.
ROCE versus return on project cost
Return on project cost measures the profit against the whole cost of the project. Return on cash employed measures it against the cash you personally put in, which is what you actually risk. Finance raises ROCE because less of your own money is tied up, but it also adds cost and risk.
Because flips run for different lengths of time, the calculator also annualises ROCE. A 15% return over six months and a 15% return over eighteen months are very different results.
Stamp duty and tax
Most flips attract the additional-property surcharge on stamp duty, because the buyer usually owns other property or is buying through a company. The calculator applies it automatically from the price, UK nation and buyer type.
The profit shown is before tax. Flipping profits are generally treated as trading income rather than capital gains, whether you buy personally or through a company, so speak to an accountant about how your profit will be taxed.