big project need help!

[Jacob Riccio]

Hello everyone! So I recently found a house that I feel like could be a sweet deal!

I was looking at zillow and saw this house that was a complete wreck, I raised an eyebrow at how bad it looked and continued on with my analysis paralysis I have been in forever because I am a college student. Two months later and it was still there, so I entertained myself by analyzing it. Here are the specs:

3 Bed 1 bath 1,186 sqft  price: $155,000 

Stucco exterior   /   lot 6,969sqft   /   Built in 1937   /   98 days on zillow   /   Extreme Fire damage to the entire house

Overall it doesn't sound good and if you look at the photos it looks even worse!...but this is where the advice and help of other BPer's would help. I thought about this house in a different way.

The market where its located is roughly $185,000-$260,000

Since this house is damaged by fire so heavily I calculated roughly $150,000 in repairs to get this house up and running again. If it was possible to get this house for under or around $50,000 given the state of the house, do the repairs. I see no way it wouldn't come out to be a good flip, or even a great BRRRR. Am I being to generous with my numbers? I am still new to REI so I could be 100 miles off here. Any guidance would be much appreciated!

Thank you for your experience!

[Nathan Platter]

Hey @Jacob Riccio ,

You'll want to leave yourself at least 15% net profit margin so you can get paid and cover any unforeseen issues. Since this sounds like a complete gut rehab, you likely won't have too many of those.

Additionally, leave room for acquisition costs, holding costs, and selling costs. 

A rehab budget is usually 25-35% of the ARV, so $150k in repairs sounds quite steep.

Either:

• find a GC who can provide even more accurate (in this case, much lower) rehab estimates or 
• see if this could be a higher-end flip (target ARV closer to $400k)

Pro flippers pass on 95-98% of all deals, so don't get attached to this property. It's (burnt) bricks and sticks with dirt beneath, it's completely OK walking away if the deal is a financial stretch.