The profit you make is not always going to be the profit you originally expect. This is usually due to unexpected costs that were not a part of your original estimate. Let's take a look at some of the most common unexpected costs when flipping a house.
Utilities - You cannot renovate (or show) a house unless it has the power and/or gas turned on.
Homeowner's Association Fees - HOA fees can really eat into your profit. Not only do buyers frown upon fees just to own a home, they will also eat into your budget when trying to flip a home in a gated community.
Maintenance Costs - Whether you do yhe maintenance yourself or hire a service to do it, there are costs involved. This includes lawn maintenance, and house cleaning after open houses.
Homeowner's Insurance - If something happens to the property, such as vandalism or a break-in, then you have to assume the financial responsibility (either directly or through insurance) for making the repairs.
Mortgage Payments - If you financed your property purchase in any way, then you will have a monthly payment to make to keep the property in your name. You will also have to pay monthly payments on any loans you took out to do the remodeling, and you will have to pay the associated loan fees every month as well.
Income Taxes - When you flip a home for a profit, you must pay income tax on that profit.
Property Taxes - You will be responsible for paying the prorated property taxes when you sell the property.
Closing Costs - You may choose to roll your closing costs into your financing when you buy the property, or you can pay them up front. These include property surveys, legal costs, insurance costs, and title search costs.
Liens - If there are liens on the property that the owner refuses to pay, then you will need to pay them before the purchase can go through.
Code Violations - During the remodeling process, you might rack up a few code violations that need to be paid before you can sell the property. Hopefully not, but especially if you are not familiar with a specific area's laws and restrictions.
