What costs are involved in flipping houses?
What costs are involved in flipping houses? - Question on Quora.com
Here are typical costs you will encounter flipping houses:
- Purchase Price - Amount paid to purchase the property
- Repair Costs - Costs to repair the property
- Buying Costs - Fees, title work & inspection costs when buying the property
- Holding Costs - Monthly costs to hold the property (insurance, utilities, taxes, etc.)
- Selling Costs - Commissions and fees to sell the property
- Financing Costs - Loan payments & points if you get a loan
Here’s a more detailed breakdown of each category.
Typical Buying Costs
- Inspection costs - $350 - $500
- Title insurance - ~$500
- County recording fees $50 - $100
- If you are getting a loan, you will likely be required to pay 2-3% points upfront, and pay for an appraisal/survey
Generally, you will have Buying Costs of 1 to 3% of the Purchase Price.
Typical Holding Costs
- Loan Payment
- Property Taxes
- HOA Dues
Typical Selling Costs
- Buyer's Agent Commission ~3% of Sales Price
- Seller's Agent Commission ~3% of Sales Price
- Home Warranty ~$500
- Title & Search Fees ~ $500
Generally, Selling Costs will be around 7 to 10% of the Sales price.
Typical Financing Costs
Here's a list of typical Financing Costs and average amounts that you will likely have on your rehab projects.
- Interest Payments (7 to 15% Interest during Holding Period) - Your interest rate will vary widely depending on the type of financing, (hard money, private, conventional), and your individual financial situation. Click here to learn more about Loans for Flipping Houses
- Points (2 to 3% of the Loan Amount) - Again, depends on the lender, but you should expect to pay a few % points upfront.
- Other Closing Costs ($750 to $2,000) - The Lender will also likely charge ridiculously inflated junk fees for miscellaneous items.
- Loan Origination Fee
- Appraisal Fees
- Underwriting Fees
- Credit Report Fees
- Processing Fees
- Rehab Draw Inspections ($100 to $200 per inspection) - Your rehab loan will be divvied up into a 'loan draws'. When you request a loan draw payment, the Lender sends a 3rd-Party Inspector to inspect the property to ensure the project is ready to receive the next loan draw payment.
Overall, your Buying, Holding, Selling & Financing Cost should be between 10% to 15% of the ARV.