Costs to Anticipate When Flipping a House
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Reality television these days is full of home repair and flipping programs, and they just make it all look so easy. But flipping a house and actually making a real profit might not be as easy as you think. Yes, purchasing a decently-priced house, renovating it and then selling it for more than you paid definitely seems doable, but you need to know what to expect before you even think about making the plunge and the biggest challenge to flipping a house is the cost. And we are not talking about the price you actually pay for the home – that is a given.
We are talking about how much money you might have to put into the house before you can ever put it on the market. So, here are some of the biggest costs that you need to anticipate when flipping a house.
Financing comes into play in the very early stages of flipping a house; unless you have millions in cash just laying around, you’ll need to pursue a variety of methods. Though getting a loan can seem daunting, there are tons of different options out there, from a traditional bank loan to even asking a friend or family member. Another great option is to look into hard money loans. These loans are typically easier and quicker to nail down, making them fantastic for anyone looking to flip their first house. Of course, the location makes a big deal when it comes to financing as well. Look for lending companies in your area, as these lenders will have a better handle on the local market and funding needs. If you’re flipping a house in Scottsdale, opt for hard money loans in Arizona; if you’re trying out your fix and flip luck in San Francisco, pick a California hard money lender.
You might have to get your house appraised before you are able to get a loan, but even if it is not a requirement, you should get an appraisal anyway. The cost of the appraisal will depend on various factors, such as the home’s overall size, its location and how many rooms it has. Once you know what it is worth, it will be a lot easier to know how much work you need to put into it in order to get it up to a price point you want to sell it for.
Getting a home inspection will give you a lot more information to go off of than a simple appraisal, and could save you some serious headaches later on down the road. This is a crucial step to take when you are figuring out what repairs need to be made to the house before flipping it. An inspector is trained to catch the smallest details that you may not have noticed when you bought the place – though hopefully it had already been inspected prior to your purchase. The cost of an inspection will vary, but you should not skip it. After all, the last thing you want is for the buyer to pull out of the deal at the last minute because they found out the foundation is cracked.
This is a cost that you should have seen coming, since the whole thought process behind flipping houses is to buy something that needs some sprucing up, fix it, and then sell it for more than you paid. But, repairing a home could be pricier than you thought. Sure, you took the flooring and fixtures into account, but maybe the windows all need to be replaced or the roof in the dining room leaks. You should always plan for repairs and remodeling in your budget ahead of time and it is a good idea to save up more money than you think you will need. Oh yeah, and you’re going to have to pay for all of that trash to go somewhere when that kitchen wall gets torn out, so prepare to pay for some dumpsters too. And obviously, doing all of the work yourself is free, but you might need to hire professionals to help you out, and that can get costly.
How do you plan on selling the house exactly? Sure, you can post it on websites like Craigslist, but we are willing to bet that won’t get you the best return. You will probably need to enlist the help of a real estate broker in your area, which will cost you.
There are obviously many more costs than just the above, but we do not want to scare you aware just yet. Just make sure to do your research, save up as much money as you can, get that loan, and you should be fine.