So, I’ve read a few books (including “Flip” twice) and am trying to get a feel for how realistic their #'s for quiet costs are… was hoping that some of the more experienced rehabbers thought these #'s were relatively accurate.
Flip says that quiets costs can be broken down as follows:
I am not including cost of money. Are these accurate #'s?
It depends on where you are. In San Diego, a $450K property would have a buying cost of $6750 using that formula. But, the reality is that tax assesments here can be far lower than the property value. So the tax portion of that formula is too high. Basically what you’re looking for in that number is pro-rated items like taxes and the closing costs (title search, etc).
Those are good ball park numbers. Buying costs are not always proportionate to the purchase price. Example- A title search is the same no matter what the property sells for. Also, states and counties have their own junk fees like transfer fee, recordation fees, etc. that will differ depending on the area you’re in.
Holding costs will depend on the size of the property (utilities), local tax rate, and insurance rates. 1.5% is close but it will differ depending on the area of course. I think all of those numbers are on the conservative side but just enough to be safe without pricing yourself out of good deals. If you don’t have hard numbers, those will do the job.
Good. I’m looking to be conservative on those numbers. If they come in less, great. If they come in more than that, hopefully it will not be a significant amount.
I’d rather focusing more time at this point understanding accurate ARV and repair costs. Seems that t here is a lot more volatility on those, and the newbies who fail don’t understand or accurately estimate those as well.
Danny the Great, not to split hairs but I’m in Texas and sales price or policy amount is used in the formula to calculate the premium. So it effects title a little bit, especially when you get into really high dollar real estate. Not sure if it’s done the same across the board. For Homes from $100,001-$1,000,000 here’s what you do:
1)Subtract $100,000 from policy amount.
2)Multipli result in (1) by $.00552 and round to the nearest whole dollar.
(3) Add $871 to result in (1)
Ex. For a 150k house- take $150k-$100k and you get 50k.
multiply 50k by.00552 and you get 260.
Add 260 to 871(which is always fixed for this price range) and you get your premium $1,131.
try it with a $105k house and you get 899. So by sales price going up 45k it doesn’t change much, almost not enough to mention. Anyhow, I just thought I’d throw that in to look smart :bobble