Minimum Acceptable Profit on a Flip

[Andy More]

I sent out my second mailer on monday to multifamily property owners with equity. I sent out 80 letter and have already received 7 calls. I've made 7 offer and so far have 5 rejections. Havent heard back from the other two yet.

Most of the people contacting me own properties that overall are in good condition and dont need any significant repairs. I've been pricing my offers with a minimum 20k profit. Is this an unrealistic profit to expect on a property that needs no renovation?

I didnt expect any accepted offers only after 5 offers but was just wondering what others thoughts were on this.

[Paul B.]

I don't think you should state your profit target in dollars. I think a percentage of the final sales price makes more sense.

You wouldn't settle for a forecast $20,000 profit on a million-dollar flip, would you? That's too tight. And you probably don't expect to make $20,000 on a $40,000 flip, either.

Personally, I'd be content to make 10% of the sales price, clean and clear, when ALL of the dust has settled. That's a pretty tight margin, too, though, so I'd aim for deals with the potential to do closer to 20%. This leaves margin for error.

I completely agree that if you're trying to make wholesale-priced offers on rental properties that are in good shape and that are rented, you're going to have a hard time making that work. Most landlords are business savvy and not interested in selling at anything less than retail unless they have other motivating factors. What you need to find are "reluctant landlords." The very first property I ever bought belonged to a widow whose husband previously took care of the property, a duplex. She wanted nothing to do with it, so she sold.