our blog

 

Rehabbing a Home? Be Ready for These 5 Costs

by | Mar 12, 2020 | Real Estate

Start your flip off on the right financial foot — with a little planning and the right team, you’ll keep your budget in the black.

So you want to calculate the price tag on a house rehab, but you have no construction background. How do you go about it?

Understandably, this is a common scenario that holds many people back from flipping houses. It’s also one of the most common questions people ask Tarek and me.

A rehab’s costs involve more than just what you pay your contractor, so ensure you consider them all by dividing them into five categories:

  • Costs of a rehab team
  • Costs of purchase
  • Costs of rehab
  • Costs of ownership
  • Costs of selling

Costs of a rehab team

Build your rehab team before you start a project. This gives you time to thoroughly screen each of your team members. The last thing you need is to hire the wrong home inspector or contractor because you were closing on a deal and crunched for time.

You want qualified people who understand your needs and investing as a business. If you’re wondering what your team should look like, here are the main players:

  • Attorney
  • Lenders
  • Real estate agent
  • Insurance agent
  • Contractor(s)
  • Home inspector

Ask other, more seasoned real estate investors for recommendations. It’s a good way to find solid, trustworthy team members, and most investors will be glad to recommend who they use.

The only possible exception to this is contractors. Good contractors can be hard to come by, and a real estate investor may not be willing to compete with you for their contractor’s time. So, you may be on your own.

If you find yourself in that situation, ask employees at your local lumberyard or hardware store for recommendations. You can also search sites like Craigslist or Angie’s List, but you’ll want to personally vet whomever you choose.

Once you assemble your team members, use their help to get more accurate rehab numbers. It could also be beneficial to enroll in a program for learning the ins and outs of real estate investment, like Success Path.

Costs of purchase

The biggest chunk of this category is probably the money you’ll pay to close on the property. But also included here is any expense you might have incurred while hiring your team members.

There are some other hidden costs here that you might not have thought of, such as flood certificates or various government fees. But in general, your main expenses will likely include the following:

  • Purchase price
  • Home inspection
  • Home appraisal
  • Surveys
  • Lender fees (your bank’s closing costs, appraisal fees, origination costs, etc.)
  • Attorney fees

Costs of rehab

This includes contractor fees, permits, and any work done on the house. It can be difficult to get an accurate number for this category, but there are a few things you can do to get close.

First, pay your contractor to do the walkthrough with you. Get their advice on things that need to be fixed or changed, and get a quote from them.

Or, find a home inspector with construction experience, then ask questions and listen to their input as they inspect the house.

You could also try partnering with another more experienced house flipper so they can teach you the tricks of the trade.

Costs of ownership

These expenses happen while you are in possession of the home. This is a common area overlooked by inexperienced house flippers, so make sure you account for these expenses:

  • Mortgage payments
  • Property taxes
  • Property insurance, including flood insurance, if necessary
  • Utilities
  • Yard upkeep

Costs of selling

It might seem like this category should be all profit. That may be true if you do the job right, but it’s still important to budget for the costs that come with selling a house, like the following:

  • Selling price
  • Real estate commission
  • Home warranty
  • Radon and lead tests, termite inspection, and other tests buyers sometimes request
  • Staging
  • Attorney fees

Get to work building your team today to get the best estimate possible for your house flipping project!

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Powered by WPeMatico

MICKI ESPOSITO

MICKI ESPOSITO

BROKER

An accomplished real estate professional with a distinguished track record of success.  She has spent over 17 years in Atlanta representing buyers and sellers of $1M+ properties and is a tremendous negotiator.  Micki has a unique knack for forming close and authentic relationships with her clients; she steps beyond the real estate transaction and provide them with after care.  Micki has unparalleled marketplace knowledge and thrives on being resourceful; she studies and follows the data beyond the average agent.

WE CAN HELP YOU.

DON’T DELAY. NOW IS THE PERFECT TIME TO MAKE A MOVE.

Set up a FREE consultation with me today. I’ll be sure to make your real estate experience as unique, simple, and satisfying as I can.

Momentous-Staging
HOMEOWNERS GUIDE TO SELLING IT FAST 30-DAY PLAN
CSRA Market Update | Augusta Metro Real Estate Conditions | Augusta Realtor Micki Esposito

It’s All About Supply and Demand | HOME PRICES

As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of...

HOUSE OF THE DAY 😊

  Welcome to 215 Hornsby Lane located in the luxurious River Island neighborhood. This stunning move-in ready home is nestled in the charming cottage section of River Island, offering a lifestyle that combines modern luxury with timeless appeal. With a listing...

Real Estate Market Trends?

The Changing Real Estate Market: Remote Work and Technology The real estate industry is constantly evolving, my friend. Trends and factors shape how buyers, sellers, and agents navigate the market. Today, I want to discuss the latest market trends that are shaping the...

17 Hobbies Just Right to Become Money-Making Side Hustles

If you’re looking to make some extra money, side gigs like babysitting and Uber are great options, but they aren’t the only ones. Whether the pandemic quarantine ignited a love of baking or the excitement of shopping in stores again hasn’t worn off, you can find ways...

How To Sell Your Home With Better Listing Photos

Did you know that over 90 percent of buyers start their home search online, and most first impressions are made from online photos? If you want to make sure that people are interested in buying your home, you need to make sure that the impression it makes is a good...

6 Ways to Overcome the Emotions of Selling a Home

Selling your home can stir up a range of emotions you may not have expected. While you may feel excited about the opportunity to move into a new house, you may also experience feelings of sadness or loss as you prepare to sell your home. Use these tips to help...

5 SIMPLE WAYS TO ADD INSTANT CURB APPEAL.

            Don’t lose potential buyers due to any flaws or unsightliness on the exterior of your home. Use the tips below to wow people at the curb and get them in the door! The best part is, you don’t have to spend a fortune or break...

What does it mean to you: the Future of Home Price Appreciation?

Many consumers are wondering what will happen with home values over the next few years. Some are concerned that the recent run-up in home prices will lead to a situation similar to the housing crash 15 years ago. However, experts say the market is totally different...

WHAT OUR CLIENTS ARE SAYING.

"The Best of the Best"

“Best of the best! If you are looking for a personal, boutique-style home purchasing experience, I highly recommend Momentous Realty. Micki Esposito was fantastic! We discussed what I was looking for in a home in detail, and that same day, she emailed me a short list of properties tailored to what I asked for. I felt like she truly listened. No generic emails with 50 listings of houses you have to weed through yourself. She weeded through the fluff and was able to focus the search on homes I would actually consider. As a result, my home search actually went much quicker than I anticipated. Micki was there from the beginning and even after the closing. She was not only my realtor, she was an advisor and my advocate behind the scenes. I believe that because of all her hard work, the entire process was efficient and much more painless than I expected. I would not hesitate to work with her again and I cannot say enough good things about Micki!”

– Dr. A. Jeffery

Her in depth Knowledge & Integrity are clear from the start.

We were so lucky to have worked with Momentous Realty | Micki on our home purchase. Her involvement in leveraging our position in our home purchase and synergistic solutions are the very reason why we are homeowners today. Her service was beyond compare, even a more powerful statement knowing that we aren’t her typical market. Her strong in-depth knowledge + integrity are clear from the start.

– M/M Woodson, Senior Executives

The results were amazing

She was very professional. Kept us informed every step of the way for a quick worry-free closing. Definitely will use her again.

– Dathne Johnson

One Call That's All...

MICKI is awesome she will help you with all your real estate needs. One call that’s all. Thank you for everything Micki.

– Stacey Manson

The epitome of integrity and grace.

Micki is the epitome of integrity and grace. I love and appreciate her wisdom and willingness to share her words of knowledge with those that she encounters. I can always look to Micki to be uplifted and encouraged.

– Lease Youmans

Our Go-To Realtor, knowledgeable, professional & dependable.

We couldn’t have been any happier with Micki and her professionalism throughout our temporary relocation process to Metropolitan Atlanta during filming requirements. Almost immediately, Micki and her team provided us with leasing options based upon our family requirements. She thoroughly explained the leasing process, attended every showing with us, and provided us with enough information to ultimately make our decision to purchase another home within the area.

MICKI, thank you and your team for the amazing work!

– M/M Washington, Entertainment Industry

BECOME A MOMENTOUS INSIDER.

 

Pin It on Pinterest

Share This