Hidden Costs to Consider Before Investing in That Fix ‘N Flip

Fixer upper houses can be a great investment for you to make. However, before signing all the papers and sealing the deal there are a few hidden costs you should be aware of before it’s too late.

Carrying and Removal

When you sign on that house, you’re immediately responsible for all the everyday costs of the house, on top of the renovation costs. This includes maintenance and upkeep along with utilities, mortgage and trash pickup. Now, trash pickup is usually no big deal, but when you’re renovating a home, there’s a surprising amount of rubbish that must leave the home. Removal can get very costly, especially for bigger items that will require special pickups, so keep that in mind before you finalize the deal on that fix ‘n flip home.

Realtor

You don’t have to pay for the realtor’s assistance in buying the house, but he or she does get a commission of the selling price of the home when you flip in and put it back in the market. You may be able to sell the house without the assistance of the realtor, but generally your realtor will have a much wider set of connections than you do and can likely get your house sold so much faster than you could have sold it.

Insurance

Believe it or not, insurance on fix ‘n flip homes often does not cover very much. You can buy additional insurance plans specifically for fixer upper homes, but it is an additional cost. Now, with all that you’ll be doing in the home, you acquire a lot of additional risk in the insurance department. This is good to keep in mind when you’re laying out your budget; be sure you make a decision to either get additional insurance or be able to cover the costs of any disasters that might occur during the renovation process.

Interest

Because it’s difficult to find a traditional lender interested in loaning for fix ‘n flip homeowners, you may have to go with a nontraditional loan offer to cover the mortgage. And while there are excellent private loan solutions available, you may be looking at significantly higher interest than you would be paying had you been approved for a traditional loan.

In short, fix ‘n flip houses are often well worth the investment, but it’s a good idea to account for all associated costs beforehand. With careful consideration and a good knowledge of the market, you can still set yourself up for great success by flipping homes.