For those of you interested in embarking on the journey of fix and flip properties, it is important to consider how you will spend your money and where. Often times, beginners make the mistake of putting too much of their budget into one small part of their project which can result in disaster. It is important to take time to access the main areas where money will need to be spent and determine a rough estimate of how the money will be divided for those projects. Be sure to research and talk to experienced flippers when deciding on your budget. Here are some tips to help you with the process.
After Repair Value (ARV)
Be sure to have a basic idea of what your property will be worth after you complete renovations. This will be extremely helpful in building a realistic budget and not over investing in something that will not give enough return. A great resource will be an experienced realtor who knows the market and can help you have an accurate estimate of the ARV of your property.
Take time to come to an accurate assessment of the costs for each of the major repairs you will do on your investment property. Be sure to include the cost for cosmetic repairs such as paint and new flooring. Write the budget for each thing on a piece of paper and stick to your plan when you begin renovations.
Since you will be responsible for the mortgage or financing on the property until you are able to resell it, you must have a plan for the costs involved with ownership. Be sure to plan accordingly for HOA fees, utility fees, home owner’s insurance, and property taxes, in addition to the mortgage payment.
Be sure to account for sneaky additional costs that will be part of any fix and flip property. Be aware of inspection fees that you will incur during the renovation process. Additionally, you should be prepared for interest on any loans you take out to finance the project, closing costs, and contingencies.
Don’t Forget Realtor FeesUnless you are planning for reselling the property yourself, you will need to account for realtor fees. While you may be hesitant to hand some of your hard-owned profits off to someone else, using a realtor can be the quickest most reliable means of reselling a property. In the long run, using a realtor usually saves you money as your property is less likely to stagnate on the market.