If you are considering getting into house flipping, it’s important to know about all the costs involved.
Ideally, you want to purchase and flip a house that will sell well in the market. Here are some traits you should look out for to see if the market has the potential to do well:
- The average time houses spend on the market before they are sold
- Rate of home ownership
- Average income
- Cost of living
These indicators will give you a better picture of whether the market is good for house flipping.
The cost of fixing and flipping a house involves everything from renovation to loan costs. Here are the costs that you should take into consideration in a house flip.
Consider the Costs of Conducting Due Diligence and Paying for Reports
You’ll first need to purchase the property you want to flip. This is the largest expense you’d be dealing with. The cost of purchasing the property is often readily available but there are other factors you have to take into account. For older homes especially, you may need to fork out additional expenses for reports and repairs. Thus, you should carry out an inspection before making the purchase so you have a better idea of what you need to spend. If you are using a private lender to borrower money to purchase the property, you shall also be paying for an appraisal report.
Cost of Renovation
This will likely be the second most expensive cost you’ll incur. The cost of renovation is largely dependent on the condition of the property. The size of the house, the extent of the renovation, and labor costs in the area of the property also play a role. Houses that only require a fresh coat of paint and landscaping work will be less expensive to renovate compared to one that requires heavy electrical, structural, or plumbing work. If you’re working with a lender like InstaLend, these costs will be included in your loan amount.
You’ll need vacant or unoccupied property insurance to protect your property during the flip in the event it is broken into, vandalized, or damaged by a storm. Typically, this insurance policy is paid for in full upfront at the time of purchase. The amount you have to pay depends on the location, the duration of the vacancy, and the value of those.
You’ll need to secure the funding to purchase and renovate the property you want to flip. There are various ways to fund a house flip, one of them being through a fix and flip loan offered by InstaLend. This short-term loan is specially designed for those who want to buy and renovate the property with the intention of selling it for a profit within 12 months. Securing a fix and flip loan through InstaLend has many advantages, including:
- Fast funding: Get your loan in as little as two weeks’ time
- Less risky than traditional home loans as they are backed by property that you are granted
- Short terms: See your ROI quickly
Applying for a fix and flip loan is easy with our online form. Our experienced team will provide you with the advice you need to make an informed decision about your real estate investment.
The costs of fixing and flipping a house may seem overwhelming at first but when you break them into different categories, you will have a better sense of the expected expenditures.