About to put offer on a single family. Would appreciate feedback

[Alon Helman]

Hey everyone!

I've been following the forums here, and I have to say the the info from the community is invaluable. I gathered up the courage to put an offer on a house in Oakland for a superficial flip. I wanted to check with you and see if these numbers and timeline make sense. I would appreciate any feedback as this would be my first flip.

The numbers are conservative. The realtor said we could flip it for 10k more than what the report say, but I'm sticking to the average of the comp. All in all it's a 30k profit if everything is correct.

This is the property:

https://www.redfin.com/CA/Oakland/1745-67th-Ave-94...

These are the comps of properties sold within less than 0.5 mile radius.

https://drive.google.com/open?id=1KmdHLEAISOck9tRx...

This is the breakdown that I went over with my realtor. We covered most things, but I would like to get a second opinion from you guys.

https://drive.google.com/open?id=1gFTjHiJO2tB_mPJn...

Thanks!

[Jim K.]

@Alon Helman

This post well illustrates a common beef I have with how Bigger Pockets and other real estate investment education entities encourages investors to think about flipping houses. It's all bloodless numbers and vague projected costs.

@Ryan P. Kotschedoff made a quick point about your projected rehab costs that you have clearly brushed under the table, offering that you have "contingencies" to cover "those unforeseen issues." That is a red flag. Clearly, you don't want to go into the weeds about the rehab, and THE WEEDS ARE WHERE YOU NEED TO BE.

The rehab costs are always the Achilles heel of this and any other spec rehab project. You have one page in your "Property Report" labeled "Purchase and Rehab Analysis." In that report, you have ZERO analysis of the actual rehab. You state that you anticipate the cost to be $52,000 and you add an additional 12% contingency to that to get to $58,240.

This is your second post in Bigger Pockets. You have provided no details on your profile regarding your level of residential renovation knowledge and/or experience and/or contacts. You have mentioned nothing about how you came to the round figure of $52,000 as a rehab cost other than vaguely assure your readers that all your numbers are "conservative." There is no timeline for the rehab. There is no shot at a scope of work. There are even no pictures of the bathroom and only two of the well-outdated kitchen, while we have one of of a credenza and two of a backyard that has seen better days. We have no idea if the shack whose wall we can see in one of the shots of the backyard is this detached garage. I have to go to the first picture and then street view to confirm  that there are apparently no gutters on this house. The selling agent's copy talks vaguely about knocking down a wall and improving a space. There is no floor layout for us to see what s/he means.

These are only a few examples of why you need to get deep into the details of the rehab if you intend to make money on this or any other flip/spec rehab deal. The numbers are only going to get you so far.

The numbers won't tell you if your GC is going to flake out and disappear three weeks into this rehab, if this dubious person hired a trim carpenter who doesn't know how to cope inside corners, if your flooring guy's going to assure you that of course there's no problem with having vinyl flooring in the kitchen of a home that you intend to sell for over half a million dollars, if you have plans on replacing those Lowes bargain bin flushlights in the kitchen and hall with something else, if your drywall guy will eventually tell you that, sorry, he knows nothing about plaster repair in structures dating from the 1920s, if that ceiling in the living room is popcorn, painted popcorn, asbestos-laden old painted popcorn, or just a knockdown texture finish, why there is a washing machine in the kitchen, and the hits just keep on comin'...

Get in the weeds of the rehab analysis, Alon. It's dirty and it's nasty and you're going to have to grub for your money there. If the weeds aren't where you want to be, you can always buy mutual funds with your five thousand bucks of initial investment and see where that gets you.