Glossary
Carry costs (holding costs)
Carry costs, also called holding costs, are what it costs to own a property each month while you renovate and sell it: loan interest, property taxes, insurance, utilities and HOA dues.
Carry costs are the price of time. They are small each month and large in total, and they are the first thing to blow up when a project runs long.
How to calculate it
Add up every monthly cost of ownership, then multiply by the months from purchase to sale, including the months it takes to sell.
- Interest: $171,000 at 11% / 12
- $1,567.50
- Property tax: 1.0% of $190,000 / 12
- $158.33
- Insurance (vacant / builder's risk)
- $150.00
- Utilities
- $200.00
- Other (lawn, security)
- $50.00
- Monthly carry
- $2,125.83
Interest here is on the purchase funds only; rehab draws add more as they are drawn. Insurance, utilities and other match Run The Deal's planning defaults.
What to watch
- Time to sell. Many budgets stop at the end of the rehab. Listing, contract and closing can add 2 months.
- Interest basis. A lender that charges Dutch interest bills on undrawn rehab money too.
- Loan extensions. Running past the loan term often costs a point per extension.
- Vacant property insurance. Standard homeowner policies may not cover a vacant rehab.
Each extra month on this example costs about $2,126 plus interest on the rehab draws. That is why timeline is one of the biggest swing factors in flip profit. Model delays in the flip calculator.
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