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Are You Thinking About An Investment Property To Flip? What Are The Fixed Costs?

“Flipping” a property can be profitable but you must be aware of ALL the costs you will incur

What are “fixed costs.” I think of them as all the costs involved with a project apart from the actual renovation costs; these will include the purchasing and selling costs, various fees and holding costs.

For ease these can be broken down into 3 categories:

Purchase Costs

Purchase Costs refer to those fixed expenses that contribute to the purchase of a property. These will include Home Inspection, Closing Costs and Mortgage Fees.

Holding Costs

Holding Costs are the ones incurred between purchase and sale. Typically an investor will look at Mortgage Payments, Utilities and Insurance:

Selling Costs

Selling Costs are the flip side ( please excuse the pun) of Purchase Costs. Real Estate Fees and Closing Costs.
This all effects the bottom line.

Inexperienced investors can have a tendency to just think ‘ I can buy for “x”, spend “y” and sell for “z.” Fixed costs have to be included or the would be “Flipper” may loose money rather than make any.

This entry was posted on Wednesday, April 14th, 2010 at 7:49 pm and is filed under Investment Opportunities, The World Of Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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