Please help confirm my 1st off-market flip #s in Denver, CO area

[Sheri Lowrance]

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

[Account Closed]

Originally posted by @Sheri Lowrance:

I have an off-market 2 bdrm/1 bath, 1085sf, no basement, no garage, single family home a friend told me about where the seller will sell the home for $100K cash. It is in Old Town Arvada, which is a very popular location with rising prices and rents around $2K for 2 bedrooms. Zillow shows the estimated value around $370K, which I'm confident is the minimal ARV. Home was built in 1952 and appears to have never been updated. It does have a recently new roof and sewer main line to the street. Other than that, home has NOT been maintained and is in very poor condition. With my uneducated look, it doesn't appear to have foundation issues. It will need an entire gut with new electrical, windows, plumbing, etc. The garage was converted to an extra room, so could make it into a 3rd bedroom (and additional square feet, which probably isn't in the 1086sf showed online).

 I've never done a gut rehab before, nor even a fix and flip (only a couple of minor rehab and hold).  Can someone please help me confirm my #'s and see what I may be missing or significantly estimating wrong?

ARV: 370K

Purchase Price: 100K

Closing Costs: 5K

Finders Fee to friend: 10K

Financing Costs (my LOC): 2.5K for 6 mns

Rough Rehab Costs with a GC: 150K

Tax & Insur: 4K

Utilities:  1.2K for 6 mns

Sales Commission: 22.2K

TOTAL Expenses:  294.9

Before Tax Profit:  75.1K

Thank you!  This is scary for me!!!

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.