Austin Luxury Homes

Almost all new real estate investors underestimate what their costs will be for a real estate investment property and don’t have enough reserve cash set aside to meet those costs. It doesn’t matter whether you’re trying to flip a house or fix up a rental you need to have more money than you think set aside you think to be prepared for any unexpected expenses that come up. You can assume that at some point in the process something unexpected will come up and unless you want to eat the costs you have to plan ahead.

If you’re fixing up a rental property for example you have to factor in the costs associated with making the house attractive to buyers like new paint, new carpet or having hardwood floors sanded and sealed, fixing up the landscaping and so on but also the costs associated with renting the house. You have to assume that the house will sit vacant for at least a month, maybe more, and plan accordingly. During that time you will need to pay any payments due on the house, insurance, utilities that you use to show the house, and the costs of screening prospective renters like performing credit checks and background checks.  If you don’t have enough money set aside to cover these costs and have to rent the house immediately in order to make the house payment then you could end up in serious financial trouble.

If the investment property is a house that you want to sell then you have a lot more costs to worry about and they are usually higher costs.  There are a lot of things that can sap your budget during the rehab of a home.  Construction costs often run over budget. If your time frame is too tight and you go over on the amount of time it takes to get the house ready for sale that will also end up costing you.  There will probably be at least one unforeseen problem with the property that will cost more than you have in the budget to repair. And all of those costs are before you get the house finished and are trying to sell it. Once it’s on the market the house could end up sitting for anywhere from a week to six months without an offer. You need to have enough money set aside to cover the cost of the expenses of the house for at least a month while you try to sell it.