The cost of repair and renovation
Repairs and renovations are usually the largest expense when flipping houses. It is essential to perform a thorough inspection of the property before making an offer to ensure you have a realistic understanding of the necessary repairs that need to be made. Repairs can range from minor cosmetic upgrades to extensive structural changes. Therefore, it’s essential to budget accordingly to ensure the necessary repairs are made to attract potential homebuyers. Some repairs or renovations that may be necessary can include:- Roof repair or replacement
- Plumbing or electrical upgrades
- Landscaping or yard work
- Interior upgrades such as flooring or tile work
- Exterior upgrades such as siding or repainting
Navigating unexpected expenses
Unexpected expenses can arise during any renovation project. It’s essential to plan for these unforeseen costs by including a contingency fund in your budget. A contingency fund should be approximately 10-20% of your overall budget to allow for unexpected costs such as repairs, permits, or inspections. Another way to navigate unexpected expenses is by working with contractors or vendors who offer fixed-price contracts. A fixed-price contract allows you to budget more accurately since you’ll know exactly how much each repair or renovation will cost. It also minimizes the potential for unexpected costs due to miscommunications or change orders.Financing the flip
Flipping houses requires adequate financing. It’s essential to have a solid understanding of your financing options before making an offer on a property. Financing options can include:- Traditional bank loans
- Private loans or lines of credit
- Hard money loans
- Self-funding with cash reserves or savings