Other Expenses Of A Fix-And-Flip Project
When considering how to finance a house flip, it’s important to not only make sure you have enough money to cover the expense of the real estate itself but also unforeseen costs. In addition, you’ll want to take time to review your cash flows and figure out when money may be paid to or withdrawn from your bank account.
Next up are some common fix-and-flip real estate project expenses to be prepared for.
Renovations And Repairs
If you’re looking to fix and flip a house or renovate a structure, you’ll need to pay for materials, labor and equipment. You may also need to factor in the cost of demolition, maintenance and waste removal. Keep in mind that it’s not uncommon to uncover unexpected issues or hiccups as you go about renovating and repairing a property, and your budget may quickly swell as a result.
As a safeguard, try to keep a 20% – 30% cash reserve fund on hand.
Homeowners Insurance
Homeowners insurance provides you with a financial safety net, as it guards against potential property losses or damage, including around real estate rehabs. Properties (especially distressed properties) may often be viewed as higher-risk holdings that require you to obtain a policy separate from your personal homeowners insurance package.
Obtaining homeowners insurance comes at an added expense for real estate flippers but can help you safeguard your property against accidents, damage, natural disasters and other events.
Utilities
Real estate investors may often find themselves needing to pay for utilities such as gas, water and electricity. Sewage and trash may also present expenses you’ll have to cover. If you need questions answered about the average cost of utility expenses for your property or geographic area, be sure to check with your local utility providers.
Additional Expenses
Other fix-and-flip expenses often come into play as you seek to renovate and rehab properties. For example, if you want to change the layout of certain areas of your property, you may need to hire a general contractor. If you want to install new floors, you’ll have to pay for the cost of materials. If you hire someone for these jobs, that’ll mean paying for the cost of labor, too.
You can also expect to pay property taxes and capital gains taxes. As a result, it’s wise to maintain a cash cushion for expenses that might crop up as you go.
