How to Record the Sale of a House Flip: Bookkeeping for the Closing Statement, Payoff and Profit

What is on the sell-side settlement statement?

The sale price, the costs charged to you as seller, the loan payoff, any prorations, and the net wired to you. The bottom line is cash received, which is not the same as what the deal made.

• Sale price: the contract price. $405,000.00 on Project 1.
• Costs charged to you as seller: commission, escrow and title, transfer tax. $22,915.50 on Project 1.
• Loan payoff: the balance owed plus interest to closing day. $295,168.44 on Project 1.
• Prorations: bills that cross the closing date. None on Project 1.
• Net to you: what escrow wires to your account. $86,916.06 on Project 1.

Some selling costs never appear on the statement. Project 1's staging and final clean, $1,525.00, was paid from checking against its own invoice. It is a selling cost all the same.

This statement is the mirror image of the one signed at purchase. The guide to purchase closing statement bookkeeping covers that end of Project 1.

What comes off the books when the property sells?

Everything that accumulated against the property: the purchase price, the rehab and the costs capitalized into it. That total clears when the sale is recorded, and the difference against the sale price is where profit starts.

The sale price less that $337,970.00 leaves $67,030.00. The loan costs, holding costs and selling costs come off next, and what remains is the deal's result.

The sample report shows the same deal in whole dollars, with $286,770 of purchase cost and $6,194 of loan costs: it keeps the $390 of lender-required title and recording with the purchase. Either way the net profit is $22,576 to the dollar.

How that profit is taxed is a position your CPA takes. The question starts with another: is a house flip inventory? Either way, the books record the sale the same way.

How is the loan payoff recorded?

The payoff on the statement clears the loan balance and any interest accrued to that date in one entry. If a balance remains afterwards, a draw or a fee was never recorded.

Before the sale, the books showed $293,400.00 owed on Project 1: $242,200.00 funded at purchase and $51,200.00 of draws. The payoff takes that balance to $0. The $1,768.44 of interest for February goes on Project 1 as a holding cost.

The entry for the Project 1 sale statement, dated Feb 20, 2026.

The checking line equals the statement's bottom line, $86,916.06. The credit equals the sale price.

The second entry moves the $337,970.00 from Project 1's property cost and rehab to cost of the property sold. The staging payment is a third, $1,525.00 from checking to Project 1's selling costs.

1. 1Date the entry on the closing date shown on the sale statement.
2. 2Record the sale price as the sale price of that property.
3. 3Record each cost charged to you as seller as a selling cost on that property.
4. 4Record the payoff: clear the loan balance, and record the interest to closing day as a holding cost on the property.
5. 5Record the net wire into checking, and check it matches the bank statement.
6. 6Move the property's accumulated cost, the purchase price, the costs of acquiring it and the rehab, to cost of the property sold.
7. 7Check the closeout conditions before you close the deal file.

The balance the payoff clears was built by the draws, month by month. We cover those entries in hard money loan bookkeeping.

Why is the money that arrives from a flip sale not the profit?

The wire is what is left after the loan is repaid, and the loan paid for rehab you spent months ago. Profit counts every cost of the deal; the wire counts only what was outstanding on closing day.

Demo Flips LLC, Project 1.

The gap is your own cash coming back. You paid the down payment, the closing and loan costs and most of the holding costs from checking over 135 days, and the wire returns them along with the profit.

The $20,014.63 is the $7,964.00 of closing and loan costs paid at purchase plus the $13,819.07 of holding costs, less the $1,768.44 of interest paid from the sale.

The profit is the number that tells you what the deal earned. The guide to house flip profit lists every cost that goes into it.

What about prorated taxes and the seller's credits?

Property tax and insurance crossing the closing date are split with the buyer. Your share is a cost of the holding period; the rest adjusts the cash, not the result.

At the sale the split runs the other way from the purchase. When a bill for your days is still unpaid, the statement charges you for them, and that charge is a holding cost on the property. When you paid a bill that runs past closing, the buyer credits you for their days, and only your days stay in the holding costs.

Project 1's sale statement has no proration line. The property tax and insurance for its days were paid from checking month by month, through February.

What has to be true before you close the deal file?

Four things: the property's cost is zero, the loan is zero, every rehab invoice for it is in, and the per-deal report shows a final profit. Then the file is closed and the number is real.

Demo Flips LLC, Project 1.

A late invoice changes a closed deal's profit, so the file stays open until all 4 conditions hold. Once they do, the number in the report is final.