Is flipping expensive for cash home buyers?

    Flipping is risky and tougher than it seems on TV, especially in Pittsburgh! More often than not, it usually ends up taking a bit longer and costing more than anticipated from entry to exit. Many home sellers we speak with consider flipping their own house as a possible option for selling.

    Let’s break down what all goes into a fix and flip! (We’ll show you a detailed example with realistic figures at the end.)

    Pittsburgh cash buyers typically see a return of 20-30% net profit, and a flip takes an average of 4-6 months from entry to exit. The less construction a property needs, the quicker you can sell it. This will shorten your timeline to minimize expenses and maximize profit! A home buyer in search of a flip won’t typically find the risk, time, capital, and effort worth it for anything less than a forecasted 20% net return.

    There are 4 main components: Buying costs, holding costs, selling costs, and income tax

    Buying costs:

    • Purchase Price
    • Closing costs (usually 3% if paying only the buyer customary costs)
    • Inspections: home, camera sewer, radon, pest, mold (if applicable)
    • appraisal (if applicable)
    • loan origination fees (if applicable)
    • Finders fee (if applicable)

    Holding costs:

    • Insurance
    • Utilities (water, electric, gas, sewer, trash)
    • Landscaping/lawn upkeep
    • Taxes
    • Construction (labor and materials)
    • Interest payments (if applicable)

    Closing Costs:

    • Realtor fees (if applicable)
    • Closing costs (usually 3%)
    • Seller concessions/seller assist (if applicable)

    Income Tax:

    • 25-35% of your net profit based on your ownership structure and tax strategy

    Example:

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