is a 25 percent gross return actually good or is everyone just being polite about it

The word doing the damage is gross. That 65k is sale price minus purchase price and nothing else. It hasn't touched the renovation, which on a cosmetic job you might budget 20 to 30k, or the agent commission on the sale, or the transfer taxes, or the months of loan interest. I run a small crew and I can tell you the paint and flooring alone on a 1,400 square foot house isn't a rounding error.

Gross return here means resale price minus purchase price, expressed as a percentage of the purchase price. It excludes the renovation cost entirely, which is why the number looks generous next to what operators actually keep.

Walk your own example through. You buy at 260k and sell at 325k, so gross profit is 65k. Now subtract a cosmetic renovation, say 25k for paint, flooring, fixtures and a bath refresh. Subtract selling costs, which commonly run around 6 to 8 percent of the sale price once you include commission and closing items, so roughly 20 to 26k on a 325k sale. Subtract what you paid to buy, and subtract the interest and insurance and utilities while you hold it. On those figures the 65k is largely gone before you count your own time.

On your annualizing point, you're onto something real. A flip that takes five months and nets 8k on 60k of your own cash is a very different thing from a rental that pays you for ten years. Flippers tend to think in cash-on-cash per project and how many projects fit in a year, so a thin margin repeated three times beats a fat margin once.

The part that catches people off guard is that the gross figure is calculated from public sale records, so it counts every flip including the ones that lost money. It's a market thermometer rather than a projection of what your deal will do. Two houses on the same street can land on opposite sides of it depending on what the buyer paid.

25 percent gross on a five month hold is what, roughly 60 percent annualized if it were net, except it isn't net. Once I understood that I stopped comparing it to anything.

Down in the price bands I look at, 90 to 140k houses, the percentage can look wild and the dollars are tiny. A 30 percent gross on a 100k buy is 30k, and 25k of renovation is 25k whether the house cost 100k or 300k. Materials don't get cheaper because the market is cheap. That's the trap in rural comps that nobody puts in the headline number.

@hollow that matches what I keep seeing while I study for the license exam. The percentage rewards the cheap market and the dollar profit rewards the expensive one, and cosmetic scope costs about the same in both.

One more thing that isn't in the 65k, juniper. If the house sits, everything gets worse at once. Interest keeps running, you're paying vacant property insurance which is usually more than a normal policy, and the longer it sits the more buyers assume something's wrong with it and start shaving their offers. I hold rentals rather than flip, but the holding cost math is the same animal and it's the line item people underbudget every single time.