House Flipper Budgets Next to a Real Contractor Quote

Every few months someone emails me a version of the same plan. They have put 80 hours into House Flipper or House Flipper 2, they have turned a dozen wrecked virtual bungalows into profit, and they want to know which neighbourhood they should buy their first real fixer in. I like these emails. They come from people who are curious about property and willing to work. But almost none of them have priced a renovation the way a contractor or a lender does.

I own a handful of rental units and I have done two flips myself, one of which made money and one of which roughly broke even after eleven months of stress. So I sat down with the game again and compared how it budgets a job with how my last real job was budgeted. The gap is not where most people expect.

What the game charges you for

House Flipper is honest about materials. Paint costs money per wall. Tiles cost money per square. A new radiator, sink or kitchen unit has a price tag, and the furniture catalogue reads like a mid range store. You also pay for the house itself, and the sale price at the end depends on what buyers in the game value. The sequel added buyer profiles who care about different rooms, which is a nice touch.

What the game treats as free is everything that happens between those purchases. Your labour is free, of course, since you are the one clicking. But time is also free. A house can sit half painted for three real weeks while you play something else, and it costs you nothing. No property tax, no insurance premium, no loan interest, no utility bills, and no risk that a pipe freezes in an empty house in January.

Where a real budget actually leaks

On my second flip, a 1960s three bedroom with original plumbing, the line items I had planned for looked a lot like a House Flipper shopping list. The ones that hurt were the ones the game never shows. Here is the summary from my own spreadsheet, rounded to the nearest $50.

Materials ran only about 8 percent over. The holding costs ran 64 percent over, because the job took eleven months instead of the six I had planned. The cause was a sewer line replacement nobody saw until we scoped it, followed by a seven week wait for the electrical inspection. The game has no inspection queue. Real cities do, and in mine the wait moved from about two weeks to seven between spring and autumn.

Notice how little of the total the game actually models. Materials were about a third of my real spend. The four lines that sit outside the work itself, permits, financing, holding and selling, came to $32,100, which is more than everything I bought at the hardware store.

The 70 percent rule, and why the game makes it look timid

Many investors use a rough screen called the 70 percent rule. You take the after repair value, the price you expect the finished house to sell for, multiply it by 0.7, then subtract the repair budget. The result is the most you should pay for the house. If the after repair value is $265,000 and repairs are $38,400, the maximum offer comes to $147,100.

Players often tell me that sounds absurdly cautious, because in House Flipper they routinely buy at 60 or 65 percent of the eventual price and clear a profit. They are right that the game is profitable at those margins. It is profitable because the 30 percent cushion in the real rule exists to pay for exactly the things the game deletes: holding costs, selling costs, financing and the surprise sewer line. In the game, that cushion is almost all profit. In real life, on my break even flip, it was almost all gone.

Naomi wrote about the mindset behind this in why flipping a house is a bet, and I agree with the framing. The 70 percent rule is not timid. It is a guess at the size of the unknowns.

Labour is the line players misjudge most

In the game you can retile a bathroom in ten minutes. In the real world, the tiler I use quoted three days for a 5 by 8 foot bathroom floor and surround, and he was the quickest of three quotes. Labour on my flip was 44 percent of the materials and labour total, and that was in a moderately priced market. Some trades are worse. Electricians and plumbers bill for call out time, for permits, and for the second visit after the inspector asks for a change.

Doing work yourself can close part of this gap, and painting, demolition and landscaping are reasonable places to start. But every hour you spend painting is an hour the loan is accruing interest, and you are almost certainly slower than a crew. On my first flip, I saved roughly $3,200 by painting the interior myself and lost about $2,100 of that to three extra weeks of carrying costs. Not a disaster. Not the saving I had imagined either.

It also helps to know which upgrades a buyer will actually pay for. House Flipper buyers love a fancy kitchen, and so do real ones, up to a point. Renovations that pay back less than owners think covers where that point usually falls.

What the game is genuinely good for

I would not tell anyone to stop playing. The game trains an eye for what a dated room needs, and it makes you think in sequence: clean, demolish, repair, then decorate. That order matters in real projects too, and new investors who skip straight to finishes tend to tear them out again when the plumber arrives. It is also a cheap way to find out whether you enjoy the process at all before you put real money behind it.

Your homework before any viewing

Take the last house you flipped in the game and rebuild its budget on paper. Keep the purchase price and the materials, then add contractor labour at roughly 70 to 90 percent of the materials figure, holding costs of 1.5 to 2 percent of the purchase price per month for at least six months, and selling costs of about 7 percent of the sale price. If the virtual flip still makes money with those lines added, you are thinking like an investor. If it does not, you have just learned the most expensive lesson in property for free. When you are ready to look at how a real renovation might be paid for, financing a renovation without refinancing is a sensible next read.