House flip calculation

[Yuriy Grytsulyak]

Good day all, could you take a look at my flip calculation below? I am working on my first deal and want to make sure that at least on paper it looks ok.

Purchase price 85k, rehab 50k, arv 190k. 

Hard money loan 55% of arv=104.5k. This loan will cover 100% of rehab, the rest will go towards the purchase of the house (104.5-50=54.5). The loan has the following fees 2% origination, $900 fees, 10% annual($870/month), $150 for each draw. So to get this loan i'll have to pay 

104.5*0.02+900+1500(assume 10 draws)=4.5k. Is 10 draws a reasonable number?

To buy this house: 54.5(loan)+30.5(out of pocket to get it to 85k)+3(out of pocket closing cost)

Now, once i close, i'd need to activate all utilities, which should run about $100/month as no one is living there.

I expect the rehab to take 4 months, in which period i'd pay interest of 4*870=3480. 

I expect to close on the house 2 months after the rehab is finished, so another 2 months of interest 2*870=1740

For the six months of this project I would also need to pay utilities 6*100=600 and taxes 4300(annual)/2=2150

And to sell I would need to pay a realtor fee of 6%, 190*0.06=11.4k

To sum it up

190k-104.5k(original loan)-33.5k(purchase)-11.4k(realtor fee)-3480-1740(interest for 4+2 months)-4.5k(loan origination+draws)-2150(prop taxes)-600(utilities) = 28.13k

Did i miss something? do the numbers make sense?

[Tom Shallcross]

Hi @Yuriy Grytsulyak - nice work on beginning to consider all the non-rehab costs.

Some high-level thoughts:

- I didn't see property insurance in your holding costs

-NY could be different, but in IL you'll have title costs on both closes. We also have city, state and county fees

-You won't need 10 draws, that's excessive for a 50k budget (every 5k of work)

-Your plan has 2 months to close, but buyers' loan might take 45 days, so that assumes you get under contract in first 2 weeks on the market. Def doable, but might want to underwrite for longer

-Utilities will prob be more than $100/m (I have lawncare, electric, heat, water)

-You should still be able to get a rockstar realtor at 5%, maybe less

-You'll also need money to potential pay contractors while waiting for draw, also for rehab contingency as that usually goes up, not down  

-Have funds prepared for credits that can arise during the inspection

I wrote a BP blog on how to write your own calculator in excel, I don't think I'm allowed to post it, but you can find it from my profile page. It might serve as a good checklist and help you evaluate all costs on flips moving forward. 

Hope that helps!