How much is the cost of flipping houses? Well, it varies because every house flipping project is unique. When it comes to determining the house flipping cost, there are a few things to keep in mind. These are the following:
After Repair Value (ARV)
You have to figure out the after repair value (ARV) of the property. To do so, you have to compare similar properties to yours that are already sold in the same area within the past three months. Once you find out the after repair value of the property, you can now get into details of the house flipping cost.
• Rehab cost – the cost of rehabbing a property depends on the kind of work that needs to be done. If you have a limited budget, you should find a property that does not need extensive repair.
• Budget – when setting a budget, house flipping professionals use the budget repair form. It is where the type of repair is itemized. Prior to the start of the rehab, you have to fill out the form. It helps you keep track of the repair needed which actually helps in setting a budget.
• Timeline – A house flipping project should have a timeline. The project should be completed within a stipulated timeframe. The longer the project takes the higher the expenses will be.
• Financing cost – time has something to do with the financing cost. The longer you own the house, the higher the financing cost will be. In the real estate business, time is equivalent to money. Do the house flipping method in an efficient and timely manner. Dispose the property as soon as possible. Do not be too greedy when pricing the house. As long as you have a decent profit, then you are good to go.
• Carrying cost – The carrying cost can also eat a huge portion of the house flipping cost. It includes property tax, insurance, electric, water, gas, and other related cost.
• Realtor’s fee – Many house flippers hire the service of real estate agents to help dispose the property easily. As you know, real estate agents earn money through commissions, which is usually 5% to 6% of the total value of the property.
As a house flipper, it is important to determine the house flipping cost before the start of the project. By doing so, you will be able to manage your finances efficiently. Do not forget to have a contingency budget. In case you go over your budget, you will have money to cover for unexpected expenses.
House Flipping Spreadsheet for Analyzing Your Deals
A really handy software tool that has helped a lot of house flippers is the house flipping spreadsheet. The house flipping spreadsheet is an excel worksheet where you can enter all variables, costs, and data to see how much a project is going to cost. This is important for ROI and profitability. You can read more about it here: http://erealestatelajolla.com/house-flipping-spreadsheet/
Flipping houses can be a profitable venture when done correctly. It’s not easy, but with the right tools and training you can succeed and make money.