Once you find that spectacular property, the hard part’s over, right?… Not so much. There’s still the little matter of a rehab and resell, but we’ll get to that in a minute. One of the BEST things you can do to ensure fix-and-flip success is establish a tight budget right away. This budget needs to cover the property purchase price, rehab costs and other loan costs. It needs to be absolutely meticulous, while at the same time a bit flexible to make sure unanticipated costs are covered.
You can work with your hard money lender and realtor to establish a strong budget. First, you need to evaluate the property and the neighborhood comps to decide how much to pay for a property while still maintaining a solid profit on the back end. Fortunately, Do Hard Money offers a specialized tool known as the Advanced Deal Analyzer which calculates your loan costs, repair costs, selling costs and an overall profit estimate.
After determining the best price to pay for the property and getting it under contract, put out requests for contractor bids. That way, you can solidify how much it will cost to rehab the property. At that point, you can create a specific budget for each item. As you create your budget, again, be sure to include a little wiggle room for possible unanticipated costs. Also, identify which costs are being covered by funding, be it hard money loans, gap financing, or cash-to-close you need to cover.