Is this a good flip?

Question

Asking price: $39k
Rehab: $15k
ARV: $85k +-$5k

On paper this looks like a good one, but I am a little scared because it's my first flip.  I am paying cash so this should minimize some fees.

I also want to ask what should I offer?  Is there a certain % you guys use to make your offers, like %80 of asking price?

Thank you for the info...

Raymond B. · Answer

Adam,
The similar houses that you found on the MLS:
Were they already sold, or are they for sale?
If they are for sale, comparing them is useless.
You need to find similar houses that have been sold, within as close an area to yours, as possible.

To figure your purchase price, get the ARV, deduct 30%, and deduct your rehab costs, including empty house/rehab insurance, purchasing and selling, etc.

Ray in Ct.

Steve Babiak · Answer

Some other holding costs that can happen:

Lawn / yard care
Snow removal

David Beard · Answer

Be aware that if you're unable to find good comps, this will also haunt your end buyer in their loan approval process.  The asking prices worthless, as the selling agents are just guessing in the absence of sold comps.  Expand your zone to find as comparable group of sales as possible (you need to know your area well to judge this), but you will need to build in an extra layer of conservatism (perhaps 10%).

Mike G. · Answer

Adam,

First, like the others said, pay little attention to what comparable houses are listed for.  The house you saw listed for $94k with a contract on it could very well end up selling for significantly less.  Only look at recent  comparable houses that were sold (within the last 3 months preferably).

As to your requested figures:
1) I can only give you what we've paid on our houses for vacant property insurance, which averages out to about $400-450 for three months.  But this is for houses in California around $250-$300k, so I would hope yours would be lower.

2) Purchase closing costs - don't forget escrow fee, title report and insurance, and any inspections you may want to do.  I'm sure your numbers are different than ours here, so you should get these from someone local or a real estate agent.  As for selling costs, they usually total out for us around 7%, which includes 5% for agent commissions.  Maybe it will be a little different for you in Texas.

As for the insurance, you might want to get general liability insurance (if you have a business), and/or personal umbrella insurance.  If you don't have those (or maybe even if you do), you should consider getting liability insurance up to $1million as part of the vacant property insurance.  Good luck!

Adam B. · Answer

Ray, (or anyone that can answer this)

Can you give me ball park figures on the following?

1) empty house/rehab insurance
2) closing costs (paying cash)

I know the selling costs will be 6%.  Is there anything else I am missing besides utilities, hoa dues, taxes?

Do I need any other type of insurance?

Thanks!

Adam B. · Answer

One house (the exact same floor plan as the on I am looking to flip) on mls shows there is a contract on it, and it's priced at $94k.  It has a lot of new stuff (roof, HVAC, completely new interior).  The others are just for sale, and they are between $80k and $90k.  I probably need to get a realtor to pull up all the sold houses in the area.

Thanks!

Adam B. · Answer

The $15k in rehab is a guess.  I have worked with my father flipping houses about 10 years ago so I have a good idea of how much it would cost to rehab cosmetic items.  As long as there aren't any major items (foundation, termites, etc..) I think $15k is a good ball park figure.  Of course, I will do an actual budget after inspecting the house, but I just wanted to get your guys opinion on the #s first.

The house was built in 1978 and I got the ARV from the mls.  I looked at similar houses that had been rehabbed and took $5k off their asking price to come up with the $85k.

Thanks again for your input.

James Hiddle · Answer

Dido of what Joel said also how did you come up with the ARV that too is important?

As far as the % it depends on the market condition and what your buyers want.

Joel Owens · Answer

How do you know 15k rehab is an accurate number??

If it's cash and there is no other action on it go really low.You can always go up on your offer.

What year is the property built???

Is this a good flip?

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