Many people are drawn to television images of people ripping materials out of a dilapidated house, restoring it, and selling it for a substantial profit. The benefit obtained from each change can be modest or substantial, or the investor could lose everything depending on the decisions made before or during the process.
My house move budget checklist
Before you go shopping for the perfect rehab property to remodel, you need to create a budget for the entire project, not just the purchase and rehab expenses.
The first item on your checklist has no direct monetary value and cannot be added to the expense column. However, it is an important “ingredient” for your budget: an excellent credit rating. Unless you are financing an investment entirely with cash or privately, an excellent credit score works in your favor with banks, especially when the loan is for a high-risk project like a currency exchange.
Now, let’s see the details of your budget:
• Post-Repair Value (ARV): Determining the ARV of your potential investment is the starting point on which you can base your expected return on investment (ROI) when the home is put on the market. A trusted real estate agent can help you estimate the ARV of the property.
• Rehabilitation costs – These will vary widely depending on the amount of rehabilitation work that needs to be done. An estimate repair form can be helpful in keeping track of all necessary repairs.
• Financing / maintenance costs: these include not only the loan but also the costs of maintaining the house until it is sold:
o Financing loan (s)
o Property taxes
o Public services (gas, water, electricity)
o Property insurance
o HOA / Condo Fees
An important point to keep in mind here is that the longer the rehab work takes and / or the longer the post-rehab home stays on the market, the higher your maintenance costs and the lower your profits.
• Realtor Fees: You can sell your inverted home yourself (FSOB – For Sale by Owner), but if you are looking for the quickest turnaround on your investment – and earnings – relying on a good real estate agent is worth paying. commission (and actually helps you save money on your flip project in the long run).
• Forgotten Costs – These are additional home remodeling expenses that are often overlooked, including:
o Inspection fees
o Loan interest
o Closing costs
The average budget for an experienced flipper was divided into these cost percentages:
• 53.25% = purchase price
• 20% = Labor
• 6.5% = Materials
• 8% = Transportation expenses, public services, commissions, etc.
• 12.25% = profit
Realistic budget = reduced risk
There is nothing that can completely eliminate the risks inherent in relocating, but creating a realistic budget is one of the key ways to mitigate some of that risk. Another way to “manage” some of the risks is to gain a thorough understanding of home remodeling before making your first investment. And one last way to manage risk is to follow the old adage and never invest more than you can afford to lose.
Best wishes for the success of your home!