When you’re flipping a house, there are several expenses that collectively, make up the big picture of the true cost of house flipping. There is definitely more than just labor and materials. To begin to assess all of the areas where you may incur those additional costs is a big task.
With this guide behind you, you’ll be well on the way to having an estimate as close to reality as possible so let’s take a look at specific costs you’ll want to make note of.
1 – Acquisition Costs
The first step in flipping a house is acquiring a suitable property. The cost of purchasing a property can vary significantly based on location, size, condition, and market trends. Keep in mind that the purchase price isn’t the only expense; you may also need to factor in closing costs, real estate agent fees, and potential legal fees.
2 – Renovation and Repair Costs
Renovating and repairing the property to increase its value for resale is a critical aspect of house flipping. The expense for improvements can vary widely depending on the extent of work required. Some common renovation costs to consider include:
a. Structural and cosmetic repairs: This includes fixing the foundation, roof, plumbing, electrical systems, and other essential elements.
b. Interior upgrades: Upgrading kitchens, bathrooms, flooring, painting, and fixtures to improve the overall appeal of the property.
c. Exterior enhancements: Landscaping, curb appeal improvements, and repairs to the siding, windows, and doors.
It’s key to obtain accurate cost estimates from reputable contractors and budget for unexpected expenses that may arise during the renovation process. Even a standard 10% overall contingency added onto your budget can help reduce the impact of additional costs.
Tip: Included in your renovation and repair expenses make sure to include permit costs. For a typical project they can be $1000-2000 dollars.
3 – Holding Costs
Flipping a house takes some time, and during the holding period, there are expenses that need to be considered. These costs typically include mortgage payments, property taxes, insurance, utilities, and other ongoing maintenance expenses. It’s important to calculate the holding costs accurately, as an extended holding period can significantly impact your profit margins.
4 – Financing Costs
Unless you have substantial cash reserves, financing is often necessary for acquiring and renovating the property. Financing options include traditional bank loans, hard money loans, private investors, or personal savings. It’s crucial to consider interest rates, loan fees, and repayment terms, as these costs can eat into your overall profit.
5 – Costs to Market and Sell the House
Once the house is ready for sale, you’ll need to market it effectively to attract potential buyers. Marketing costs may include professional photography, staging, online listings, print advertisements, signage, and open house events. Additionally, real estate agent commissions and closing costs should also be factored in when calculating your expenses.
6 – Contingency Fund
Even with careful planning, unforeseen expenses can arise during the flipping process. Having a contingency fund of around 10-15% of your overall budget is essential to cover unexpected costs, such as hidden repairs or delays.
Keep in mind….
When you’re flipping a house, there are several expenses that collectively, make up the big picture of the true cost of house flipping. There is definitely more than just labor and materials. To begin to assess all of the areas where you may incur those additional costs is a big task.
With this guide behind you, you’ll be well on the way to having an estimate as close to reality as possible.
Looking for ways to level up your flip design? I’ve got you covered
I have a great course for you to get multiple offers in any market! Learn the high-end flip design tips I use in my projects! Check out the High-End Flip Design Course here.
Just getting started? I have the perfect place to start! Check out my Find Your Flip course. Walk through 3 properties with me as I’m searching for the next flip project.
I also have some resources I’ve put together to help you get the information you need to move forward on creating your flipping life.
Make sure you have the Fixer Upper Checklist so you know which areas are key to added value in a home. There are several videos on finding houses, renovations, and funding on YouTube. Check out your favorite flipping topics and new videos weekly!
