• ROI: $130,000 ÷ 200,000 = .65 (65% ROI)
As you can see, using a loan in the out-of-pocket method can bring in a higher ROI because the amount of their own money the flippers spent on the project was lower.
COSTS TO CONSIDER
I briefly mentioned holding costs in the last chapter, but it’s important you know more about what they can entail. The following should be considered when you’re working out your financial plan for the property:
• interest payments (if you have loans) • real estate taxes • insurance premiums
• utilities (water, electricity, HVAC, sewer, trash pick up) • cost of renting a dumpster (if doing a lot of demo work) • landscaping (to originally clean it up & get it in its desired state and then maintaining the grounds weekly for lawn care, snow removal, etc.) • security • costs to resell the property (real estate commissions/ closing costs/termite clearance letter/anything else that is agreed upon in the new contract that you, the seller, are responsible to pay at closing) • costs of repairs made from buyers inspection requests On security, it’s important to remember that empty houses being renovated can attract criminals. This means that your home must be locked when no one’s there. If you have to fire someone who has a key, you need to change the locks, just in case. You should also consider getting a security system.
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