In a market that experienced a rather rude awakening when the housing bubble burst, no doubt that soon a wave of foreclosures hit the streets. After real estate investors ultimately decided that area prices indeed hit bottom, many of those properties would soon fall into the hands of a savvy real Property Flippingestate investor. But what if the values are approaching market?

Are fewer and fewer foreclosures being listed and the prices seem somewhat dubious? Have you thought of building new? Does it make sense? It might if the numbers work out and the value of the home when completed is much greater than the costs to complete or the market rent provides a healthy cash flow. What sort of costs do you need to consider?

Soft costs include fees for permits and zoning compliance. Be prepared to pay for certain city services such as plan review and code compliance. Contact the local offices where you will be building and ask for a list of all possible fees. Your architect is also considered a “soft cost” as compared to hard costs.

Hard costs are those for the physical labor and materials. Think contractors, hammers and nails. This will be itemized along with an amount set aside for any change orders that will occur during the construction period. The bank will use the plans and specifications along with the builder’s estimate of costs when evaluating a construction loan.

The construction loan will have its own set of fees including charges to approve the loan and needed services from third parties as your construction progresses including closing fees, inspections, and appraisals and don’t forget the interest on the loan.

Finally, should you decide to sell, there will be selling costs consisting mainly of the real estate broker’s commission when selling the property or even a fee to the agent when they find a rental to occupy the home.