Flipping Real Estate: Calculating CostsPosted by Nick Niesen on November 8th, 2010 If you been in the real estate investing business, or more specifically been flipping real estate, for more than a few days, you?ve inevitably gotten an email that reads something like this: ?Investor?s Dream. This property will go QUICK. - Property Address: 1234 Main Street STOP! Before you read on? Take a guess at what you think the ?real? profit?s going to be on this real estate investment? If you haven?t ever gotten an email or fax broadcast like this, then rest assured, you will! I?m about to probably tick off all of the late night infomercials and pitchmen out there! Sure, I understand that when you?ve got 30 minutes (or 90 minutes, for that matter), that you?ve to sell what?s sexy? not what?s real! Now it?s my turn to expose the real deal on real estate investing! This goes for flipping real estate itself (i.e. properties) or simply flipping the contract (also known as assigning the contract). When you?re flipping real estate, you need to be able to calculate the ?real? bottom line and if your assigning the contract, you need to know your numbers so you don?t get blacklisted from investors! This one piece of information will keep you from getting into trouble because of any ?real estate bubble?!
If you?re not getting a mortgage, your purchase costs are obviously much lower, but nonetheless, there are costs associated with any real estate transaction. Plus, more than likely, if you?re relatively new, you?re probably not paying all cash for property anyways. You?re probably going to be using a hard money investor for your initial real estate investing financing! For a quick calculation, you can estimate anywhere between 3% - 5% for closing costs to just acquire the property. That?s 3%-5% of the purchase price.
If you can remember this? and apply what you?ve just learned to each and every real estate deal that you do, you?ll be safe flipping real estate in any market. You see, if it?s a hot market, you can calculate less time for holding cost. But, in a slower market, make your offer based on 6 months or 9 months of holding costs. It?s really simple math! And real estate really is a numbers game? Recommended Resources: Like it? Share it!More by this author |