Pottstown, PA · Member since 2018 · 8 posts · 0 votes
Good Afternoon Investors,
I am a new investor and am assembling the pieces in preparation for my first deal. My question is about closing costs and how to factor them into the project cost total. I understand that closing costs are made up of 2 main areas: one time fees and prepaid/escrow items. When adding closing costs to the total project cost, is it correct to add both the one time fees and the prepaid/escrow items or should I just be factoring in the one time fees since the prepaid/escrow items are essentially recurring charges that will be expensed monthly below the revenue line? It makes a material difference in the ROI calculation if done incorrectly, which is why I ask. If anyone can assist with this question I would appreciate it.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
You add all closing costs into your investment decision usually. In my experience people seem to underestimate closing costs. It can vary by area a bit but I typically see 4-5k in closing costs, including insurance, taxes, inspection, appraisal, loan fees and title fees
Addison, TX · Member since 2018 · 4 posts · 0 votes
8y
I know of a couple brokerages that cover closing costs on their properties. Otherwise, a good rule of thumb is 3% (purchase price) to any agent involved, 1% for title, and 1% for misc. fees. Appraisals/inspections are usually ~$400/each. Lender fees vary.