Hidden Remodeling Costs New Investors Forget

When I first started investing in real estate in 1993, I was shocked at all the costs that came with buying and selling property. If you are just getting started and plan to buy your first investment property to rent or flip, there are costs people tend to forget when they start a remodeling project.

Closing Costs, Coming and Going

One of the big costs people overlook is closing costs. I am not just talking about closing costs when you buy, but also when you sell. Depending on the purchase price and resale price, they can add up to thousands of dollars. If you use a real estate agent to sell the property, the cost goes up even more.

Before buying, do your homework and talk with a closer at your local title company. Ask what the average closing costs will be at the price you are considering. Then ask what they will be at the higher price you hope to sell for after the remodel.

For example, if you buy a home for $50,000, you might have $2,000 in closing costs. When you sell it for, say, $100,000, you might have about $3,000 in closing costs if you do not use an agent. In that example, you would need to build about $5,000 into the cost of your project.

Closing costs can vary a lot from one title company to the next, and they run much higher in some parts of the country than others.

Lender Fees and Interest

If you are financing the project, talk with your loan officer and get a detailed cost breakdown on your loan. Figure out how much interest you will pay each day you have the loan. I like to budget a full 12 months of interest into my expenses. That gives you plenty of time to remodel and sell.

I always overestimate expenses so I am not surprised when a project runs over budget, which it always does. That is why it is so important to buy at the lowest price possible, to give yourself a cushion in case things do not go as planned.

Know Your Market

Spend as much time as you can studying your market. If you have a good relationship with a local real estate agent, ask them to pull comps, or comparable sales, for properties that sold in your area in the past six months. Look closest at the comps nearest the property you are thinking about buying.

Local appraisers can help too, and an appraiser is a great person to build a relationship with. Consider hiring one to appraise your properties after the repairs. They can give you an accurate value before you list the home, and they can be a valuable resource when you are looking for your next investment.

Be careful with appraised values, though. Appraisers can pull comps from miles away. That is nice when you need a house to appraise for top dollar, but it can also give you an unrealistic value for your specific neighborhood. When you ask an agent or appraiser to pull comps on a home you want to buy, make sure the comps are as close as possible to that home.

In Summary

Before buying your first investment property, contact several local title companies for a realistic estimate of closing costs, get a detailed cost breakdown from your lender, and get to know a local appraiser. I just wanted to pass along this reminder to new investors. I hope it helps.

Update, October 2026

I wrote this in 2020, and every word still applies. The biggest change is the cost of borrowing. Freddie Mac's weekly average for a 30 year fixed mortgage was 7.28% on October 1, 2026, and short term loans for investors usually cost more than that. That makes the interest line in your budget much bigger than it was a few years ago, so run those numbers carefully before you buy.

You can see some of the houses we have brought back, along with my running journal of East Texas projects, at greg-mckinney-mineola-texas.com.

Greg McKinney, Mineola, Texas

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