Most flip budgets start with the purchase price and the renovation. Fewer give enough attention to what it costs just to own the house while the work gets done. Those monthly costs are called holding costs, and they grow with every week the property sits unsold.
This article lists the main holding costs, explains how an interest-only payment changes your monthly picture, and shows how to build a carry budget that still works if the schedule slips. See how Kings of Capital and how it structures flip loan payments fits into the plan. Program terms are offered only to qualified borrowers and subject to change.
What Holding Costs Include
Holding costs are everything you pay between closing on the purchase and closing on the sale. The usual items are:
- Loan interest each month Property taxes Insurance, often a builder's risk or vacant property policy Utilities such as water, power and gas Lawn care, snow removal and security Association dues, if the property has them
Selling costs, such as agent commissions and closing fees, come later. Count them separately so you rental portfolio loans do not confuse them with the monthly carry.
Why Time Is the Biggest Variable
Each cost above repeats every month. If your plan assumes five months and the project takes eight, the extra three months of carry come straight out of profit. Delays in permits, materials and contractor schedules are common, which is why a sound budget assumes some slippage.
A simple way to see this is to add up one month of holding costs, then multiply it by the number of months you expect. Do it again with two extra months. The gap between those two answers is the price of a delay.
How Interest-Only Payments Work
With an interest-only loan, your monthly payment covers the interest and none of the principal. The balance stays the same until you pay it off at the end, usually by selling the property. With a fully amortizing loan, each payment includes a piece of principal, so the payment is larger. For a broader reference, how non-recourse loans differ covers the basics.
For a flip, that is a good match. You are not trying to pay down a loan over decades. You are trying to renovate and sell. A lower monthly payment keeps more cash available for contractors, permits and surprises.
What the Programs List
The lender's fix and flip loans with interest-only carrying periods are listed with 9 to 18 months of interest-only payments, loan sizes from $75K to $5M, and no W-2s. The program page lists financing of up to 100% of purchase and rehab, subject to a 75% loan-to-value cap.
The hard money loans with interest-only rehab periods are listed with 3 to 9 months of interest-only payments. That is shorter, so it suits a tight project. Terms are offered only to qualified borrowers and subject to change, and the lender does not publish rates because it says pricing is set to the deal. Ask a lending expert what your monthly interest would be.
Remember That Interest Grows With Draws
On a loan with rehab funding, interest is usually charged on the amount actually advanced, not on the full commitment. This is general industry practice, and details vary by lender. As draws are released, the balance rises and so does the monthly interest. Your carry in month two will be lower than your carry in month six. Outside sources such as the loan-to-value ratio give a fuller picture.
Build your budget so it reflects that. Many new flippers use one flat monthly number and later find their costs climbed. Ask your lender how interest is calculated on your loan and what the payment will look like at full draw.
Build a Carry Budget That Survives Delays
Follow a few habits when you plan the carry:
- List every monthly cost with a real quote or bill Model your expected timeline and a longer one Keep cash reserves for at least a few months of payments Recheck the budget each month against actual spending
The lender states that reserves are one of the factors reviewed in underwriting. Having them also protects you if the sale takes longer than planned. Use the calculators to add up flip holding costs before resale to test several timelines in a few minutes.
Do not forget selling costs
Holding costs end at closing, but selling costs begin there. Agent commissions, title fees and transfer charges vary by state and by deal. Ask your agent and title company for estimates so your profit figure is net, not gross. A flip that looks strong before these items can look ordinary after them.
Cut the Carry Where You Can
You cannot remove holding costs, but you can reduce how long you pay them. Order permits early. Schedule the trades in the right sequence. Pick finishes that are in stock. List the home as soon as it is ready, and price it against recent sold homes so resale does not drag.
Also look at the policy side. Ask your insurance agent about coverage for a vacant renovation project. Gaps in coverage can cost far more than the premium.
When the Plan Changes to a Hold
Sometimes the resale market softens and you decide to keep the home. That shifts you from short-term carry to long-term financing. A soft market is a good reason to know your options before you need them. Read about soft money loans if a flip turns into a hold, which the program page lists at up to 80% LTV with 30-year fixed or ARM options.
You may also want to review rental loans as a fallback when resale stalls. The lender lists rental closings at 22 to 35 days. Whether a refinance makes sense depends on the property income, your equity and your goals, so consult your CPA or attorney as well.
Get Your Carry Numbers Checked
A second set of eyes can catch a missing line item before it becomes a problem. You can book a call to price the holding costs of a flip with a lending expert, or contact the lender with your flip carrying cost estimate. You can also call (267) 630-2875.
No one can promise approval, and monthly costs always depend on the loan and the property. But a written carry budget, tested against a longer timeline, is one of the best protections a flipper can have.