Do You Know ALL the Expenses Associated with a House Flip?

[Joshua Dorkin]

One of our Bloggers, Justin Pierce, wrote a fantastic article that took an in depth look at all of the costs associated with a house flip.

This is a MUST read for any newbie rehabber/flipper:

Please leave your thoughts below the article, or here.

[Champak Shah]

Hey it is a nice detailed expalaination for newbies and some experienced investors to take note. However, still missing several expenses such as :

1. Property Appraisal -- If I am buying from a Whoelsaler -- I like to have my own appraisal --" as-is" and after repairs value. Which may cost $3000 to $6000.

2. My Profit-- Before I decide to even consider the property --I have to make sure that I make at least $20,000 profit
for houses under $150,000 ARV and $40,000 for houses above $150,000 ARV.

3. Discount -- No one ever sells a house at Full FMV or ARV price --in todays economy. Even before recession --most buyers ask for discount off of listing price. I may discount 10 % to 15 % to sell quickly in todays market.

4. Closing Costs -- If I want to sell quickly after finishing repairs and / or increase my profits by reducing holding costs --I may have to sahre some of the closing costs for new buyer ( end buyer) --upto 3 % --- or some times offer FREE HDTV or even a Car --

5. Realtor's commission --yes -he did mention that when selling --However I may offer 5% commission instead of 3 %
to attract more buyers and more agents
interest --there by creating more competition for offers as well as reducing holding time.

That also assumes that Realtor's commission is paid by Bank ( Lender ) when we buy the house.

6. One more -- Dont forget to add at least 10% contingency --on top of contractor's bid for repairs --

7 Also --if you are buying out of state --make sure the repair estimates are prepared by that city
( state's ) local contractor--certifide and licensed in that state.

8 That reminds me another expense --if repair costs are over certain amount or for certain type structure ( such as a deck or adding new bathroom ) - may require a building permit from city or county--so add permit costs --some times included in contarctor's bid.

In general -- I never take what they show
as profit on listed properties --in BP or other websites. I assume very conservatively --half the profit or less -of the equity shown. Each property has to be evaluated on its own --based on ARV,
holding time, repairs and profit before making offer to buy.

champak shah