How do you make a budget for flipping a house?

By: Contributors

Flipping a house may sound easy, but it isn't always. The idea behind buying a house and selling it quickly for a much higher price is the same as any basic investment. Your best bet is to buy a house for a low price and sell it at a high one. The low price should be due to an undervalued property or disrepair that can be fixed with a minimal amount of time and money. Flipping houses was easier before the real estate bust, but the most important part of your flip remains the same: the budget. Of course, you also have to find the right property and know whether you can fix it yourself or enlist friends to help. Still, the budget is a make-it-or-break-it part of house flipping.

To start out with a house flipping project, you need to get financing. Before the downfall of subprime mortgages, this step was easy. The high interest rates weren't such a big deal since people only held onto the property for a short time. But now, with a flat market, you'll have to be able to put down a higher down payment and be able to soak up the high interest rates if your property doesn't sell right away. This means cash is important. The more money you can use for a down payment, the lower your interest rates will be; plus, you need money to complete the house's fix-ups.


If you plan to flip a new-construction home, the process is the same as if you were buying the house to live in. You have to pay for the mortgage, insurance, tax, realtor and lawyer. But if you are buying an older house that needs work, you have to add in the renovations to your budget. Experts suggest that whatever you final estimate is, you should add 20 percent to that to cover any unexpected expenses.