Investing in real estate is always a good idea. More and more people decide to buy properties in order to flip them. This means they buy a property, renovate it and then sell it for a higher price. If you’re into home design and you are looking for new challenges in your career, this might just be something you should try to do. Still, how much does it cost to flip a house? We have come up with a list of basic costs of an average house flip that will help you enter the world of real estate.
If you are starting to flip houses with no money, you will have to loan some from a private lender. First of all, you will have to know how much money you should borrow. This is something you can find out by contacting your realtor and taking a look at all the houses you think may have a potential for flipping. Of course, you will also need to think about the interest. So, let’s say you are lending $120.000 with annual interest rate of 10%. Most of the houses can be renovated and sold in 6 months, which means you will be facing interest cost of $6000. Of course, the amount of time necessary to sell a house can change quite a lot so make sure you stay informed before you start any flipping projects.
Once you buy a house you intend to flip, it’s time to start renovating it. In this industry, there’s no place for quick “fix and flips”, and all the renovation projects have to be planned very carefully. Only that way will a house actually gain on value and get you your profit. There are many different things you can opt for while renovating a house. This means you can add new rooms, remove interior walls, repaint the exterior etc. Still, all the things that are going to increase the value of a home are also going to cost quite a lot. Many famous house flippers tend to use a price per square foot in order to estimate how much the renovation is going to cost them. Another great way to estimate the renovation costs is to add a contractor to your team. If you’re applying a fresh coat of paint to the walls, you can always use paint calculator in order to find out how much paint you’re going to need.
Last but not least, you also have to pay for your realtor’s services. An average commission of a good realtor is around 5-6% which means their services can cost you even up to $15.000 when buying a $300.000 house. Still, this is totally worth it, especially if you’re doing business with an experienced realtor. In fact, having a good realtor as a part of your team is an absolute must if you want to succeed in this line of business. Realtors know the market and they will always help you sell the house you have flipped while you are working on your next project. Even though many people believe they can sell the property themselves and save that 5-6%, in most cases having a real estate agent in your team means you will be flipping homes much faster and thus gaining more profit.
Having all of this in mind, it’s obvious that you have to be very careful when entering the house flipping business. Make sure you don’t make any rash decisions and always plan your each move wisely.
December 22, 2016