Financial Plan Set

OK. Now is the time to gather together all the costs you have determined for a specific property to see if it is right for a flip. Incorporate every known cost into your financial plan. Leave nothing out. Include the number of months you will be making mortgage payments before the property is sold. Six is an excellent number for this figure. Include other payments you will need to make for taxes, insurance, water, electricity, job telephone, garbage collection, and assessments. Be precise. Expect the flip to take two times as long as you figure it will take and four times longer than you want it to take. Plan accordingly.

Here is a checklist which you should modify to for the specific property you are considering. Use this list as a guide to construct your own list. This list is only a beginning list. Make your list as long as you can. The longer the better.

Cost of the property - This is the amount you will offer the owner to buy the property.

Closing costs payable by the buyer- This comes from the title company.

Inspections prior to purchase

Material not provided by contractors

Equipment not provided by contractors

Job electricity cost

Telephone

Garbage collection

Assessments

Mortgage Payments

Insurance to include liability and damage as required by the mortgage lender

Property survey if required or not if the property lines are in question

Dumpster including cost per pound when dumping

Contractor amounts by trade:

Landscape including plants, fill, sod, trees

Driveway

Sidewalks

Carpentry rough and trim

Foundation

Roofing

Siding, stucco, brick, stone

Fireplace, chimney

Patio, Deck

Exterior Windows

Exterior Doors

Exterior paint

Insulation

Interior walls

Interior Paint

Air Conditioning and Heating

Appliances

Electrical including fixtures

Plumbing including fixtures

Flooring

Cabinetry

Vanities

Entertainment of workers

Mortgage payments before sold

For sale signs, advertising, open house party

Utilities for six months after the house is completed and waiting to be sold. Electricity, Garbage, Water, sewer, telephone, cable TV

Real Estate closing fees when property sold. To include title insurance and tax stamps, filing fees and broker fees.

Hopefully the amount spent on many of these topics will be zero. The more zeros the better.

Add everything together.

Subtract this total from what you feel the property will sell for. 

Have someone else check your figures.

Will all this work be worth the effort? It may not be. You may make more money working for someone else. Go into the flip as informed as possible so there are fewer disappointments.

Here is a suggestion about pricing your flip for sale. These amounts are important to consider since you do not want to own the flip forever. Work with figures like this to see what the worst case may be if you have to sell for, say, ten percent below market to get out of a project before it eats you alive with mortgage payments, insurance payments, and utility and maintenance payments.

If you plan to sell quickly, reduce the selling price one percent for every week you want the property to sell faster than eight weeks.

So if you want the house to sell on open house day, set the price at 8% below the comparables price for a similar house in the neighborhood.

One week later, 7% less. Two weeks, 6% less. Three weeks, 5% less. Four weeks, 4% less.

Five weeks, 3% less. Six weeks, 2% less. Seven weeks, 1% less. Eight weeks, list for the full comparable price for the neighborhood.

If you have not sold your property in two months, consider a lower asking price and stress that you are willing to accept offers. See what happens.

Example.

Say that the house you have is properly estimated to be worth $100,000.

If you need to sell the house during the first week, price it at $92,000
If you need to sell the house during the second week, price it at $93,000
If you need to sell the house during the third week, price it at $94,000
If you need to sell the house during the fourth week, price it at $95,000
If you need to sell the house during the fifth week, price it at $96,000
If you need to sell the house during the sixth week, price it at $97,000
If you need to sell the house during the seventh week, price it at $98,000
If you need to sell the house during the eighth week, price it at $99,000
If you need the house to sell after eight weeks, price it at $100,000

If you have not sold your property in two months, consider a lower asking price and stress that you are willing to accept offers. See what happens.