Why categories come first
Budgets go wrong most often through missing lines, not through wrong guesses on the lines you remembered. Listing every category before you price anything makes those gaps visible. Once the categories are set, local professionals can help you fill in figures that fit your situation.
No figures on purpose. Costs vary widely by region, house and year. Ask contractors for written bids, a lender for financing terms, an agent for selling costs, and a CPA or tax professional about taxes.
The categories
| Category | What it usually includes | Who can help price it |
|---|---|---|
| Buying | Purchase price, inspections, appraisal, title search and title insurance, closing fees, recording fees | Agent, title company, attorney |
| Renovation: hard costs | Labor and materials, demolition, debris removal, dumpsters | Licensed contractors |
| Renovation: soft costs | Permit fees, drawings, engineering, specialist inspections | Building department, architect or engineer |
| Holding | Loan interest, property taxes, insurance, utilities, lawn care, security | Lender, insurance agent, tax assessor |
| Selling | Agent commission, staging, photos, buyer concessions, closing costs | Agent, title company |
| Financing | Loan fees, points, appraisal, draw inspections | Lender |
| Taxes | Tax on any gain, which can be treated differently than a home you live in | CPA or tax professional |
| Contingency | A reserve for surprises found once work begins | Your own judgment, with input from your contractor |
Holding costs grow with time
Holding costs are the ones people forget. While you own the house, you keep paying for the loan, insurance, taxes and utilities, whether or not work is happening. A delay in permits, a slow sale or a long renovation adds to this category every month. That link is why the timeline and the budget belong in the same plan.
Insurance on a vacant house
A standard homeowners policy may not cover a vacant house under renovation. Ask a licensed insurance agent about coverage for vacant properties and for renovation work, and check what your contractor's insurance covers.
The contingency line
A contingency is money set aside for things nobody could see before work started: rot under a bathroom floor, wiring that has to be replaced once a wall is open, a sewer line that fails. Older houses tend to need a larger reserve. Treat the contingency as part of the budget from the start, and track every change order against it.
Tracking as you go
Keep a simple ledger with each category, the planned amount, what has been spent and what is committed. Save every invoice, receipt, permit and lien waiver. These records help your accountant and show a buyer what was done. A CPA can tell you which records to keep for tax purposes.
A word on financing
Flips are financed in many ways, and terms differ a great deal. This site does not recommend any loan type or lender. Talk to more than one lender, read the terms closely, and ask an attorney or financial professional about anything you do not understand.