Know the Full Cost to Flip a House Before Approaching Private Mortgage Lenders in PA

Wouldn’t it be great if you knew right now that your next fix-and-flip was going to cost you $20,000 plus the house purchase price? A flat fee to rehab a house would make things so simple.

Calculating the full cost to flip a house is much more complicated, and it can be tempting to skip this step or guess at the numbers, but a successful real estate investor is a master of numbers. There are few things as important as knowing your numbers before going into the project—this includes: knowing your numbers before approaching private mortgage lenders in PA if you’re looking to finance the project.

Not only will your mastery of the numbers help you know if it’s a good deal, it wil help you get a loan and stay on track during the rehab.

So, how do you calculate the costs?

The cost to flip a house is not just one cost (like $20,000 to rehab the house). Instead it’s many costs that have to be calculated and then added up to give you the full cost to flip the house. Private mortgage lenders in PA will want to see that you’re actually pretty good at estimating the full cost to flip a house and then sticking to that budget, even if there are unforeseen circumstances. So let’s review all the costs that go into that total cost to flip. We’ve listed them under four broader categories of expenses.

Purchasing Costs

Your flip profit starts with your purchase. It’s vital to your success that you secure the lowest deals possible on the houses you’re flipping. This purchase price is usually the biggest cost to flip a house, but there are other purchasing-related costs to consider:

  • paying off liens
  • title search cost
  • closing costs and/or legal fees
  • property taxes
  • insurance

Repair and Rehab Costs

Entire handbooks have been written to help flippers accurately estimate repair and rehab costs. To succeed as a flipper, you have to get very good at estimating your total rehab cost or you can bring in a contractor who can estimate it well. Start your estimates with all the house systems, like the HVAC system, the plumbing system, electrical system, and the roof. What else needs to be repaired? How much renovation does this house require? What jobs must be complete to maximize the resale value?

Holding Costs

The reason it is so important to have a timeline for your flips and stick to it is so you can minimize the holding costs. Just holding onto a property while fixing and flipping it will cost you money. Most of these costs need to be multiplied by the number of months the project will take to complete:

  • utilities
  • loan repayment fees
  • insurance
  • property taxes

Selling Costs

Even after the rehab is completed, there are more expenses to take into account. All too often private mortgage lenders in PA have had to deal with borrowers who run out of money and cannot afford to pay these selling costs.

  • cost to market the property
  • real estate commission
  • attorney fees / title company fees
  • property taxes
  • miscellaneous fees

Conclusion

Work hard at calculating the full cost to flip a house. Follow a clearly defined process that helps you calculate all the costs involved in the project. It’s much easier to apply to private mortgage lenders in PA when you can show that you know the full cost of your flip.

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