First Flip - Closing Costs Question

[Ryan Fuchs]

My partner and I are looking at our first flip. We will be able to purchase the house for around $130,000. It currently comps for around $205,000 (with a range of about $180,000 - $230,000). Barring anything unexpected, we will need to put about $15,000 of rehab into it, and the rehab is estimated to take 3 weeks (so I'm assuming closer to 4-5). We will then list it for sale (I'm using $215,000 as a somewhat conservative estimate based on the houses currently for sale in the area and the houses that have sold within the past 6 months or so in the area - all of which have sold for $220,000 or higher in comparable condition) with the hopes of selling within 1-2 months, or less (in my calculations, I'm factoring in 6 months of holding/carrying costs to be on the "safe side").

The current plan is that I'm going to cover down payment, closing costs, and monthly carrying costs with a draw against the HELOC on my personal residence, with my partner covering rehab costs (he is a contractor so he will be doing the work as well).

I've been using the BP fix and flip calculator, but have a question about closing costs and how to factor them in under this specific scenario.

In the calculator, should I put the actual closing costs into the "buy closing costs" field (sell closing costs are the same no matter what I do with buy closing costs so that is not at issue here)?

Or should I leave that blank since we'll effectively be financing those costs for the several months that we own the property, and I'm accounting for payments on the HELOC and the mortgage in the monthly carrying costs section?

The way I am thinking through it in my head, if I include the buy side closing costs separately, and then account for the HELOC payments in the carrying costs section, I'm basically accounting for closing costs twice.

But it's also possible that I'm not looking at it the right way, or I'm missing something completely since this is my first flip and foray into real estate investing. So, if anyone could shed some light on the best way to enter that info into the calculator to get the most accurate results, that would be fantastic.

And please let me know if there is more information needed or if I'm not making sense on any of the above.

[Wayne Brooks]

Well, closing costs are a Real cost whether you paid "out of your pocket" or "borrowed the money for them".....I'm talking about calculating profit, not some type of ROI calculation.

If your closing costs are $5k, and the interest on borrowed money for them is say $150 for six months, you have to count them both as “costs”.