How Long Does It Take And How Much Does It Cost To Flip A House?
Posted on
October 30th, 2009
by Jerry
Also, what are ALL the fees and costs involved in buying a house to flip. I know the basics of renovations, but I just need to know the fees and costs involved in BUYING a home. I also know that once you put a down payment on a home, you just have to pay monthly payments until you sell the “flipped house”. So, just tell me ALL the costs and fees involved and how long it will take to complete the entire process. THANK YOU!
Anyone guaranteeing you can flip a home in 1 to 4 months is not being entirely honest with you. At the present time, there is 10 months of housing inventory on the market. This means that on average, it will take you 10 months to sell your house AFTER fixup, unless you seriously underprice it, which cuts into your profits.
Figure your closing costs to buy the house are 3 to 5% of the purchase price. Then closing costs to sell are another 3 to 5%. If you use an agent to sell, that’s another 6%. So, worst case scenario, to buy and sell a $100,000 house will cost you $16,000. A $100,000 mortgage for 10 months at 5.25% will cost you about $4,500 in interest, so now you are up to $20,000. Add in whatever it costs to fix up the house and that is your breakeven on the renovations and sale (and btw, every month it takes you renovate up front costs you an extra $425 in interest).
Have you noticed all the ‘flip your home’ shows have left TV? The reason for that is that the ‘flip’ business flourishes during an upmarket, but DIES when the market drops. Without a rising market, the process just doesn’t work.
Here’s why:
You buy the house. You will then have to spend a few thousand dollars in closing costs. Legal, inspections, appraisals if you need a mortgage, often a survey, plus the final adjustments for taxes etc (you’ll get many of those back when you sell, but it’s still money out of pocket.
Now, during the several month long reno period, you’re paying taxes, and interest, as well as interest on any costs for the work itself.
Now, you’re all done, let’s say 4-6 months down the road. In a rising market, the value of your house has gone up more even than the renovation would make it. Let’s say you did smart renos, good quality, and picked JUST the right house (quality, location, etc). You might expect the renovation to add double your costs (spend $20,000, raise the value by $40,000). A $20,000 profit. But from that you’ll take those interest and other carrying costs, so maybe you lost $6,000? Your ‘profit’ is now down to $14,000. In 2007’s rising market, the house probably went up in value more than that, so you’re laughing. But today? The house could have DROPPED in value while you worked on it. Even a tiny drop, and suddenly your profit is gone.
Oh, and then you get to pay 6 o 7% of the gross sale as commission .
Most of those wheeler dealer flippers lost their shirts in the last year, I’d be willing to bet.
Wait until the market is demonstrably moving UP before trying to get into this business, unless you’ve got the cash to buy a house and sit on it until it does.
It is hard to determine because I don’t know what house your flipping. It can take a week to a year. You would need to invest $5000 to $30 000. What you need to do before you buy a house to flip is write all the things you need to change goto home depot and call contractors to determine how much it will cost?
it takes like one month(if your in a hurry and advanced at flipping) to 4 months(if your taking your time and a begginer at flipping)
and you make the budget. if you want a quality and nice house you have a bigger budget, if you want to make a so so house and average house you make a lower budget. the costs are ALLL your decision.
This is not the time to flip. If you want to get into real estate, then buy a foreclosure or short sale. You can fix up and get a very good rent for it. Once the market bounces, then sell. Now is not the time to flip ( sorry to repeat myself ) you will loose your shorts.
You need cash in full to purchase the property unless you can get Hard Money which is around 16 % now. Renovations cost twice what you budgeted, or even more. It takes at least 2 -3 months longer than planned to finish. It will take a long time to sell for far less than you think it is worth.
You question indicates that you are not ready to “flip” houses. Get a good introductory book on house buying. There are several available.