For many, flipping homes is lucrative. However, there are many costs associated with flipping a property, and it’s important to budget carefully for every detail. Here are the major costs to consider when determining how much funding you’ll need for a flip:
Down Payments
Just like buying a move-in ready house, buying a house you intend to flip will require a down payment. Depending on the terms of your financing and the total price of the home, the down payment will be your largest expense to plan for. Traditional mortgages call for about a 3% minimum for a down payment, but this amount can be much higher with other funding sources.
Financing Costs
Most financing options will include interest. Even though they might be very low percentage rates, they are a regular cost to factor into your budget. While regular mortgages may have low rates right now, the type of loans most commonly given to house flippers can have interest rates as high as 10%.
Homeowners Insurance
Even though you might only own the house for a short time, you’ll have to pay homeowner’s insurance. Most lenders require proof of a homeowner’s insurance policy as a qualification for approval, especially if the house is being used as collateral.
Taxes
Don’t forget about adding relevant taxes to your budget. The main ones to plan for are property and transfer taxes. No matter how long you own the property, you’ll be responsible for these taxes and should set aside adequate funding for the payments.
Renovations
The cost of renovations will probably be your second largest expense to budget for. Unfortunately, this can be the hardest part to estimate. To get the best viable idea of how much money you’ll need to set aside for renovations, consult a contractor, home inspector or both to create an estimate.
About the Author
Rossy Figueroa
“Real estate” means so much more to me than simply buying or selling property...I believe it’s all about the people behind those transactions. A house would never be a home without them. That is why my first question to you will always be “what are your goals and how can I help you get there?”
Helping someone to plan and achieve their goals is just as important as listening to what they are. I know first-hand from over a decade of experience just how much it can take to make it happen. With honesty, diligence, and resilience, however, no hurdle is unconquerable. I can guide you through the entire process, always making you feel comfortable, informed, and in control. Like I said before, you are always the first priority.
I chose to partner with Berkshire Hathaway HomeServices Real Time Realty because, just like me, they realize that real estate agents are much more than salespeople. Every person and every goal is just as important as the last - and Berkshire Hathaway has all the tools and resources to get the job done.
It’s been an absolute privilege to meet some of you and help you achieve your goals. I can’t wait to meet the rest. Whether you’re looking to buy, sell, or both, I am confident that I am the last agent you’ll need. A better future awaits...give me a call and let’s get started!
