Are you doing your due diligence before flipping property? If so then make sure you read this blog post to know what are the “expenses associated with house flipping.” In today’s blog post from We Buy Houses Cash Dallas, we are going to talk about expenses in remodeling houses and the expenses that go along with that process. To make money in this business, you have to stay to the seventy percent rule when buying and watch expenses during the remodel process.
Flipping houses can be a high profit investment strategy. But you will only maximize your returns if you are careful about your costs! If you’re wondering what are the expenses associated with house flipping, so that you can budget effectively then here are seven of the biggest expenses you’ll encounter.
Acquisition Expenses
These are your costs associated with acquiring the property. They will of course include the purchase price of the property but they may also include marketing costs, the costs to meet with the seller, and any clean-up costs, legal fees, or closing costs you cover as a service to the seller.
These expenses associated with house flipping, can be controlled to a point. Again, as mentioned above, you must stay with the 70% rule when purchasing a house you intend to remodel and flip for a profit. When you cross over the 70% rule, you will not see it in the end, but you will feel it in the end. All the fees and cost above are very well covered when using the 70% rule. This is why professional cash buyers pay for all the closing costs when buying houses.
Demo And Renovation
At We Buy Houses Cash Dallas, when we walk through a house we are considering purchasing, that walk through is our inspection period. Do this part correctly and you will always make money on your remodel. This is one of the more obvious expenses associated with house flipping! These are your costs associated with demolition and renovation. It may include cabinets and counter tops, fixtures and appliances, new carpet and windows, etc. These costs are going to be a pretty major portion of your budget in most situations.
Team Costs
Once you have all the supplies and raw materials, you need someone to do the work! Even if you do a lot of the work yourself, you might need someone to help you or you might have to hire a licensed tech to do some of the work for you. These expenses associated with house flipping, is called hiring the right people for the job. Having the right team for the job starts with many interviews and you staying with your idea of what a professional trades person should do and be. Hiring a handy many or an old friend from school sometimes is the wrong way to go.
Carrying Costs
This expense is often overlooked by the “newbie” flipper but you’ll learn soon enough how important these are: Carrying costs or other expenses associated with house flipping, are the costs of utilities (power, gas, water, etc.) that you need to pay during the time that you own the property. These expenses will add up, especially if your timeline is extended. The faster you can flip the property, the less money you’ll pay in carrying costs. Again, as mention above these costs should be expected and are associated with the 70% rule. You will see more and more numbers that are associated with that 70% rule. You will also have the need to consider using the 65% rule when buying houses that need to be torn down and then build a new house on that Lot.
The Extras (Dumpster Rental, Licensing And Permits)
There are plenty of extras that you need to account for in your budget but that you might not realize before you start. These include things like dumpster rental or tool rental or even bringing in lunch for the team! And don’t forget to make sure you have the right permits or you’ll end up with another expense — a fine! Being these are simple expenses associated with house flipping, at We Buy Houses Cash Dallas, we reply on our template to remind us of everything we will be responsible to pay.
The Unexpected
Every flip since the beginning of time has had an unexpected surprise that threatened the budget and timeline. It could be problems like mold or termites, or just a delay due to inclement weather. Nearly every surprise adds an expense to your project so make sure you plan for it so it doesn’t derail you.
When looking at the expenses associated with house flipping, you will come to find that those expenses are and will always be there. As far as mold and termites, you should know these items when you walk through the house on your inspection. At We Buy Houses Cash Dallas, in our walk through of any and most all houses, we move the furniture out of the way in order to view certain area. Those areas are any furniture around water areas. The kitchen and bathroom(s) are those areas in question.
Sales Costs
You will also incur expenses associated with house flipping , when it comes to selling the property, including marketing and furniture rental (for staging). Be prepared for these costs to they don’t surprise you.
Summary
If you are counting the cost of your potential flip before you start, you’re wise to be asking, “what are the expenses associated with house flipping?” Make sure you account for these expenses in your budget. Expenses aren’t necessarily bad — after you all, you have to spend money to make money!
If you’ve read through this blog post, you’re doing a great job of gathering all the information you need to start flipping like a pro! And we’re here to help: we sell real estate properties to investors like you who want compelling real estate that might make the perfect flip. If you want to check out our inventory for your next flip, click here to visit our web site, then enter your info or call us at (214) 723-1304.