Costs of Flipping a House

[Taylor Forconi]

Hi everyone, I have been reading everything I can for a while now and I just had a quick question. I have been looking over the sticky on this forum about The REAL costs of flipping a house. Clearly all of these costs would be calculated before making an offer an a property to ensure making a profit.

I was just wondering how you could estimate costs such as broker's fee, lender's lawyer costs, and title work costs. Also, he said that he paid the points to his lender in cash right when he purchased the property. Is that the time that is normally paid or after the flip is completed? All responses are greatly appreciated.

Thanks,

Taylor

[Robert Taylor]

Taylor (hey great name!) a few various thoughts here for you:

-When you're starting out figuring your costs for the rehab work, try to estimate everything on the high end, plus add another maybe 20%, this stuff just happens every darn time. (example, say you know you need a new toilet for the bathroom remodel and this example is for a basic rehab, not a higher-end house. Now, you know you can get a decent one at HD for maybe $90, my idea would be to put in $130 for a better one-which you may end up needing for one reason or another-plus your 20%, so that's $156., round it up to $160 to keep the numbers clean and a little xtra, xtra cushion!-it may sound excessive, but this way, assuming you do an exhaustive budget with everything you can think of, you're still covering yourself for the inevitable things that will just pop up along the way!) Also, I should note that this example is for the materials only so far, labor is another factor, too! AND- Don't forget sales tax!!! I forgot it until I was nearly through my first budget and I'm not the only one!!!

-Jenkins Ramon (or is it Ramon Jenkins??) idea about UW-Superior is a great thought, I love projects near a (real) college, there's always a strong rental market, plus the faculty need places, too! You can work this through a lot of different angles, one thing I've worked before is rehabbing to sell to landlords who don't want to be too hands-on with their rentals, so a freshly rehabbed rental property is great for them because its far less likely they'll have to fix much!

-I see from doing a little research that the Duluth/Superior area has nearly 300,000 people, I'm guessing that more than half of them are in MN but also that you'd be open to deals in either state, since you're right on the border. Probably a good idea to ask a CPA or other good tax person about any pitfalls (or maybe hidden benefits!) if you did a project in MN while living in WI. Also, find out about any other various differences in real estate transactions, taxes, etc. in MN if you're considering doing deals on that side of the border, too.

-and on the 70% rule, (which I agree is a great starting point) as Will mentioned, you can adjust it based on the overall $$ in the project, but make sure to figure in EVERY POSSIBLE COST you will incur! I have 4 projects going right now, 2 of them are/will list for around $100k, 1 around $400k and one is listing this weekend for $789k. Now, I'll make less % wise on the bigger ones, but I'll still (well I sure hope!) make a heck of a lot more profit on each of the bigger ones in the end. It sounds like you're already thinking ahead about the various costs, so I think you're on the right track!