Holding costs are often overlooked or miscalculated. I define holding costs as the expenses incurred from the time a property is purchased, until the time it is re-sold, or placed in service as a rental. The reality TV shows that glamorize house flipping generally fail to mention holding costs. They show the amount paid for a property, the rehab expenses, and the sales price and leave it at that. They use those numbers to figure the profit made and fail to mention many of the other expenses involved. Holding costs can include; mortgage payments, taxes, insurance, utilities, neighborhood association fees, alarm monitoring, monthly termite services, refuse pickup, gas to and from the property, etc. Don’t forget these expenses when investigating a deal. It is imperative to plan for these expenses. It could mean the difference in a good deal and a bad deal.
Darin Shipley