There are dozens of costs on a fix & flip deal, many of them being ones you wouldn’t even think about. So how much do you really need to flip a house?
Starting on a fix & flip investment business is exciting and overwhelming. You’ll probably feel both a rush of excitement and impending doom once you start factoring in all the things you’ll have to pay for before the house can be sold. So what’s a good amount of money to have set aside? Is $100,000 enough to flip a house, or will you need a lot more?
$100,000 is plenty for the rehab, closing costs, and other fees that come along with real estate investing. You’ll need a hard money lender for the bulk of your project, but you can flip homes for much less than $100,000—even less than $5k when done right.
Let’s talk about what all of those extra fees are going to look like below. I’ll also give you a few ideas for the hidden fees new investors forget about that can destroy your profits. Check it out.
How Much Should I Expect to Pay Fixing Up a House to Flip?
After your purchase price, the most expensive part of flipping a house involves the repair costs. The amount of money you’ll end up spending varies based on several factors, but I’ll give you a few general ideas to help start a budget.
First, you need to decide what the end result will be for your fix & flip. If you’re looking to invest in a property that will become a rental home, I would consider having a budget of around $10 per square foot for repairs. This gives you enough of a budget that you can fix up the place to make it desirable for renters but not so much that you’ll be waiting for a decade’s worth of rent checks before seeing a profit.
If you’re planning to purchase a house solely to flip, then you’ll need to decide how much of an effort you’re willing to make investing in repairs and upgrades. I like to categorize these costs into three buckets: “light,” “medium,” and “heavy.”
Light repairs include basic things like updating fixtures or putting a fresh coat of paint on; not a lot of intensive repairs. For light repairs, I usually estimate my costs to be around $14 per square foot.
Medium repairs include essential rehabs, upgrading appliances, and maybe a refresh of the kitchen or bathroom. For medium repairs, I like to estimate my costs to be around $26 per square foot.
Heavy repairs are when the house needs an extensive overhaul. This can include anything from a total kitchen rehab, a new deck, or even putting on an addition. I typically budget around $37 per square foot for heavy repairs.
If you want a little more detail about what your budget should look like, I’ve pooled together the most popular repairs fix & flip houses get and a rundown of what their costs are. Remember that this is only a range, and your costs could vary based on location, market volatility, time of year, etc.
|Type of Fix||Examples||Average Cost|
|Exterior Aesthetics/Curb Appeal||Landscaping, power-washing siding and sidewalk/driveway, repainting or adding new siding, replacing windows and shutters, updating exterior light fixtures||$2,082 - $23,219 depending on the quality of new fixtures and additions|
|Interior Aesthetics||Paint, Cleaning, Repairing or replacing fixtures and cabinet hardware, new carpeting or rehabbing hardwood floors, replacing light fixtures||$1,200 - $9,000 depending on the quality and intensity of work being done|
|Kitchen Rehab - Light||Replacing outdated appliances with new energy-efficient models, replacing fixtures and cabinet hardware, adding an island, replacing sink and countertop with basic models||$26,214|
|Kitchen Rehab - Heavy||Replacing outdated cabinets and appliances with top-of-the-line commercial-grade models, replacing backsplash with glass tile or imported ceramic, installation of pot filler faucet over stove, installation of water filtration system, installation of new tile or hardwood flooring||$149,079|
|Bathroom Rehab - Light||Replacing fixtures, updating with a standard toilet, counter, sink, or shower/tub options, painting or wallpapering walls.||$24,424|
|Bathroom Rehab - Heavy||Overhauling layout, replacing fixtures and toilet, shower, sink, and counter with high-end options, adding heated floors, improving HVAC||$75,692|
How to Calculate Closing Costs on Fix & Flips
Now that we’ve covered the biggest costs you’ll be responsible for, let’s talk about all the other fees you’ll need to put in your budget. Many of these fees get overlooked or underestimated and can end up destroying potential profits. Don’t skimp on knowing how much you’ll be responsible for when you’re working on a fix & flip.
|Type of Fee||Definition||Estimated Cost|
|Closing Costs||Fees lenders charge like document preparation or processing fees||See table below|
|Utilities||Gas, Electric, Water, Sewage.||$500, but estimate higher if you’ll be holding the property during winter or summer based on location.|
|Transfer Tax||Taxes you’ll pay to transfer ownership of the property during purchase and sale.||Varies by municipality, city, and state. Some are optional, while others are calculated as a percent of every $500. Percentages range anywhere from .04% - 3% and higher|
|Lawn Care||Maintaining curb appeal, sometimes a requirement based on localities or HOAs.||$129/month|
|Title Fees||The cost you pay for your lender to receive title insurance before finalizing the mortgage. Paid both when you buy and sell the home.||1% of the purchase price|
|Hazard Insurance||Can also be called Liability Insurance. Basically, ensuring that you’ll be covered if something should happen to the home while you own it.||~$750|
|Interest on the Mortgage||The interest rate on your loan. Accrues daily.||12% - 20% based on variables like credit score, down payment, etc.|
|Compliance Fee||If you’re dealing with a real estate brokerage, this is the fee they’ll charge for things like completing and filing your paperwork.||Typically anywhere from $100 -$300|
|Origination Fee||Also known as “Points.” The fee that your lender charges to open a loan with them.||3% - 8% based on variables like loan amount, payment terms, credit score, down payment, etc.|
|Agent Fees||The fees you’ll pay a real estate agent for both the purchase and sale.||6% - 8%|
A Resource to Help You Calculate Costs
If you’re one of our members, then you have access to the Advanced Deal Analyzer software. We created this calculator as a way for real estate investors to determine whether they should pursue a potential deal or if it’s not worth the effort.
The Analyzer will tell you exactly what costs to expect, how much cash you’ll need to bring at the time of closing, and what amount of profit you can expect on every property you buy.
100% Financing Through a Hard Money Lender
Of course, the best option of all is to find a hard money lender who’ll lend you the bulk of the money you need for your deal. In fact, even if you have the money to cover the entirety of your deal’s costs, I would still borrow from a hard money lender!
Look at this this way:
Let’s say you can complete one (very small) deal with your $100k.
But, using a hard money lender, let’s say each deal requires $20k…that means you could have five deals going on at once! Whether you actually want to do five at a time is another question—but having more liquid capital is always a win.
Here at Do Hard Money, we offer true 100% financing. That means for deals that are good enough, we’ll cover your purchase, rehab, and all your closing/loan costs. In fact, 37% of our deals require $0 cash-to-close!
If you’ve got $100,000, then you’ll be set up to fix & flip any property successfully. The most important part is ensuring that you’ve correctly estimated your costs and planned a detailed budget that keeps you in check. Use the estimated costs above or our Advanced Deal Analyzer if you want more specific figures.
Did I miss a fee you think new investors should know? Leave a comment and tell me what it is!