A lot of people who get into property investments go into it thinking they’ll buy a low-cost, high-potential property, fix it up, and make a ton of money with minimal out-of-pocket costs. That’s a great plan on paper, but many of those people end up watching their capital get eaten up by hidden costs, projects they didn’t anticipate, and even the costs of selling.
If you are interested in flipping properties, you should be aware that there are some important costs you need to take into account to keep from spending too much money and losing your return on your investment.
This article will help you find out what are the actual costs of flipping a house!
1: Property Costs
The most apparent cost you’ll need to consider is the cost of buying the property itself. Even houses rife with problems and unlivable at the time of sale are expensive. If you spend too much acquiring the house, you’ll take a loss when you sell, regardless of how much work you do to it.
The key is to find a home that is relatively inexpensive but stands a good chance of selling at a much higher price once you get done with it. Profit margins can be small. So, any reduction in acquisition price will be highly welcome when you cash the check after the flip. Home auctions are a great way to find something that suits your needs with low property costs.
2: The Cost of Renovation
When you buy a house to flip, you typically buy one with problems. Then, you fix it up and sell it for more than you bought it. However, those repairs and renovations aren’t free.
If you buy a house that is simply outdated, you might only need to pay a few thousand dollars to update the outlets, get some new appliances, and put a fresh coat of paint on it. That’s a flipper’s dream; getting a high-quality house that needs a few aesthetic changes and modernization upgrades.
However, not every home you buy is going to be like that. In fact, there will usually be relatively costly changes that need to be made.
Things to look out for are the foundation, roofing, and major electrical or plumbing problems. Big repairs cost tens of thousands of dollars before you even think of renovating the home’s appearance, and that can quickly remove the possibility of you getting a return on your investment.
3: Monthly Costs
Just because you’re not living in the property doesn’t mean it doesn’t cost you money while you own it.
You will need to pay the financing bill, maintain the property per municipality codes, keep the home secure, and if you keep the home in your name long enough, you’ll even have to pay the annual property taxes. After all, you are the homeowner.
This is a good reason to sell quickly, too. You’ll mitigate these costs by doing so.
4: Selling Costs
Even selling your home isn’t free. You must pay money to get that big check from selling the house. This can be expensive. Good realtors cost a considerable amount, the government wants to tax everything, and the costs quickly rise.
Luckily, Auction Flippers can help mitigate the costs of flipping a house dramatically. You just pay a $299 technology fee to list your house for auction, and you have several options at your disposal to ensure you keep your profits within your expected range.