The cost of flipping is more closely related to a moving variable than a fixed expense. If for nothing else, it’s impossible to formulate a universal equation to pinpoint the exact cost a flip will incur. It is worth noting, however, that while the individual costs may be difficult to account for, there are broader expenses that can make the task of estimating a rehab deal much more manageable.
As I already alluded to, there’s no ubiquitous formula to account for every expense your next flip will incur. There are simply too many variables and personal preferences to account for––each of which may be as unpredictable as the last. To that end, no two properties are alike, and the cost of flipping will vary significantly from market to market, let alone property to property.
Simply put, the cost of flipping is contingent on too many unpredictable expenses for investors to remain confident in a universal answer. That said, there are broader expenses that investors may not be able to pinpoint exactly, but it certainly helps to budget for them. Even if you don’t know exactly how much they will be, those costs include, but are not limited to:
Almost every expense included in the cost of flipping can be broken down into these four categories.
Much to the chagrin of active first-time buyers, the cost of purchasing a home isn’t relegated to its initial price point. Sure, the cost of acquisition is the largest cost to flip a house, but it is by no means the only cost investors will incur when purchasing the home. There are actually several costs investors must take into consideration when buying a home. The purchasing cost is, therefore, the culmination of several expenses––the most prominent of which is the purchase price. As any investor will tell you, however, there are more costs you should be on the look out for:
The cost of flipping increases dramatically when you include individual rehab and repair costs. That said, rehab and repair costs are often the hardest to account for. A typical rehab could have anywhere from a few rehab and repair costs to countless expenses. The best any investor could really hope to do is account for as many as they can. To give yourself an idea of what to expect, here are some of the most common rehab and repair expenses over the course of a flip.
As their name suggests, holding costs identify the expense one will incur from maintaining control of a property. More specifically, investors will run into expense the moment they buy a house. To that end, holding costs are the expenses that will occur by simply keeping the property up and running. Holding costs may include, but are not limited to:
While holding costs won’t necessarily break they bank, a proper budget will account for each and every expense. The more accurately you can pinpoint the cost of flipping a house, the better.
No house flipping cost spreadsheet, or budget for that matter, is complete without the costs one can expect to incur from actually selling the home. That said, do not forget to account for selling costs when it comes time to calculate the cost to flip a house. Selling costs can amount to a large sum, and are the culmination of several expenses:
All things considered, selling costs can amount to several thousands of dollars, and need to be factored into the average cost to flip a house.
The cost of flipping can’t be broken down by a simple formula, nor is there a universal equation that will solve all of your expense problems. There are simply too many variables to account for and unforeseen circumstances that may arise, but I digress. A truly great investor knows the idea isn’t to pinpoint the exact cost of flipping, but rather to ballpark it. And since it’s nearly impossible to pinpoint the exact cost of a flip, the next best thing will do: an estimate.