Buying to flip: how to price a sheriff auction property for resale

Most people who lose money flipping property didn’t lose it on the renovation or the sale. They lost it on auction day, by paying too much. On a flip, your profit is decided the moment the hammer falls, so the one number you need before you walk in is the most you can bid and still make the return you want.

This guide shows you how to work that number out, backwards from the price you will sell for. The calculator at the bottom does the arithmetic for you, with the example below already loaded.

1. Start at the end: your resale price

Everything hangs off the price you will realistically get once the work is done. Be conservative. Use recent sales of similar properties in the same complex or street, not the asking prices on property portals, and ask a local agent what they would list it for. If you have to stretch to make the numbers work, the deal probably isn’t there.

2. Decide your minimum profit

Pick a rand figure, not a percentage, and treat it as a cost like any other. It has to cover your risk: a sale that takes longer than planned, a renovation surprise behind the walls, or a buyer who falls through. On a R1.5m to R2m property, most traders won’t move for less than R200,000 to R300,000.

3. Add up every cost between the bid and the sale

This is where flips go wrong. The bid price is only the start. Between the auction and the money landing in your account you will pay:

• Sheriff’s commission: 6% on the first R100,000, 3.5% on the next R300,000 and 1.5% on the balance, with a minimum of R3,000 and a maximum of R40,000, plus 15% VAT. On most houses you will hit the R40,000 cap, so budget R46,000.
• Transfer duty: nothing on the first R1,210,000 of the purchase price, then 3% up to R1,663,800 and rising bands above that (SARS rates from 1 April 2025).
• Transferring attorney fees: usually around R22,500 plus VAT for the conveyancing.
• Outstanding rates and levies: the buyer pays the arrears. Phone the transferring attorneys listed in the gazette notice for the figures before the auction. On a neglected property these can run to tens of thousands of rand.
• Renovation: you are buying voetstoots, usually without seeing inside, so budget for the worst case and add a contingency.
• Holding costs: if you borrow, interest runs from the day of the auction until you are paid out. Even cash has a cost: money tied up in the property isn’t earning anywhere else. Be honest about how many months you will hold it.
• Agent’s commission on the sale: typically 5% to 7% plus VAT. Enter 0% if you will sell privately.

The calculator leaves out a few things you should still think about: bond registration costs, occupational rent or the cost of removing occupants, insurance while you hold the property, and the tax you will pay on the profit.

4. Work backwards to your maximum bid

Take your sale price, subtract the agent’s commission and your minimum profit. What is left has to pay for everything else: the bid itself, the sheriff’s commission, transfer duty, attorney fees, arrears, renovation and interest. Because commission, duty and interest all depend on the bid, there is no simple formula; the calculator solves for the bid that makes the whole thing balance.

A worked example

A three-bedroom house that will sell for R1,800,000 after a R150,000 renovation. You want R250,000 profit. An agent will sell it for 5%, you expect to hold it for 6 months on borrowed money at 11%, the attorneys tell you there is R25,000 in arrear rates and no levies, and conveyancing will be about R22,500.

• Sale price R1,800,000 less agent’s commission of R103,500 (5% plus VAT) leaves R1,696,500.
• Take off your R250,000 profit: R1,446,500 is the most the whole project can cost you.
• Out of that come the sheriff’s commission (R31,714 with VAT), attorney fees (R25,875 with VAT), arrears (R25,000), renovation (R150,000) and six months’ interest on everything (R75,410). Transfer duty is nil because the bid is under R1,210,000.
• What is left for the property itself is a maximum bid of about R1,138,500. That is 37% below the resale price, which is a normal gap for a flip once the real costs are counted.

Change any one input and watch the bid move. Hold the property for twelve months instead of six and your maximum bid drops by about R67,000. Sell privately and it rises by about R95,000.

Five mistakes that turn a flip into a loss

1. Paying for potential. The resale price has to be what the finished property will fetch, not what it could fetch if the market picks up.
2. Forgetting time. Transfer from a sheriff auction can take months on its own before you even start the renovation. Interest and rates keep running throughout.
3. Under-budgeting the renovation. You usually cannot see inside before you bid. Assume the worst and add a contingency.
4. Ignoring occupancy. The gazette notice often says whether the property is occupied. Removing occupants takes time and legal costs, and you cannot renovate around them.
5. Bidding past your number. The calculator gives you a ceiling, not a target. If the bidding goes above it, let it go. There is another auction next week.

Disclaimer: Please note the above information is for general guidance only and is not to be relied upon without conducting your own due diligence. The calculator uses simple interest and the SARS transfer duty rates in force from 1 April 2025; it does not include bond costs, occupational rent, insurance or tax on your profit.