Seasoned real estate investors know how to accurately estimate the costs associated with any particular investment and beginner investors will soon know how to do the same. For those relatively new to the game, it’s more than just comparing remember closing costs associated with real estatewhat you pay for the property and what you sell it for. You have to consider the various costs involved and it’s more than just your down payment.

 

Remodeling and Repair

This is an obvious cost but also one of the costs that will have the most adjustments. You, your home inspector and your contractor will make a very good estimate but there will be times when you discover additional repairs are needed the further you get into a rehabilitation project. When making estimates, always include an additional 10 percent or more for cost adjustments. You’ll rarely spend less than you originally estimated but there will be times when you spend more. Bet on it.

Financing Costs

Beyond the down payment, you need to expense the costs associated with obtaining a loan, either from a private lender or a bank. You’ll need an appraisal, lender fees, points and title and settlement charges just to name a few. To get an idea of potential costs, contact a loan officer and ask for a closing cost estimate.

Selling Costs

The costs to sell a home can go beyond repairs but preparing a home for sale as well as paying the real estate commissions to the agent listing your home. That amount can vary and is negotiable between you and the agent so don’t think that you have to stick to an industry standard such as five or six percent sales commission.

Time

Are you buying real estate full time? Part time? Your time is indeed your money and you’ll spend a fair amount of time researching and evaluating well before you make an offer on a property. If you don’t place a value on your own time in the business, you’re ignoring a tangible business expense. Spending 20 hours per week in your business looking for real estate should be accounted for.