Rehab homes have become quite the trend in recent years, thanks to shows like HGTV’s “Fixer Upper.” With the right tools and experience, a “fix and flip” can make you a profit. But miscalculations and false expectations can lead to poor investments. So if you’re thinking of attempting a rehab, it’s essential that you know how much money the project will cost you before you get excited about how rich it’s going to make you. Here are some hidden rehab fees you need to keep in mind.
Have you ever heard the saying “you don’t know what you don’t know?” It holds true for fixer-uppers. A house could look like a great deal from the outside and end up being a money pit underneath. To avoid this hassle, you need to get the house inspected and appraised so that you know what is/isn’t wrong from the outset, but also so that you know you’re getting a fairly-priced home according to market value.
Carrying Costs: anywhere from $ to $$$$
Carrying costs are what you are paying on the house while it’s being fixed up. Carrying costs will vary from project to project, but they include the electrical bill, water bill, taxes, insurance, and interest that you pay while you are in possession of the home. Yes, this means the longer it takes you to fix and flip the home, the more money it will cost you all around. Consequently, it’s best to over-figure for this category. Because, even with the inspection, you could run into an issue a couple of weeks into the job that’ll cost you more time (and money) to resolve.
Know how much money the project will cost you before you get excited about how rich it’s going to make you.
Wholesale fee: $1,000-$5,000
If you decide to enlist the help of a wholesaler, expect to pay for that service. Wholesalers and real estate agents are great resources for investors, because they know the market and have the connections to score you a good deal. Their time and expertise are definitely worth it, so be sure to factor their fee into your cost as well.
Some other fees you might incur during a fix-up and flip deal are real estate agent commission, title/attorney fees, and contractor fees. Don’t let hidden fees deter you from investing in a fixer-upper! Just be wise and remember to factor them into your estimated overall cost. This way, you’ll avoid unwanted surprises at the end of a deal.