Possible Flip in Sacramento Area (Ca) - Advice/Lenders?

Question

Hi Everyone,

This will be the first deal that my husband and I are working on together as a team, as the other 3 I have done I did by myself. My husband and I have been taking classes and going on tours to become further educated about the Fix & Flip business and how it works in more detail. We are now connected with an elite group of area investors to help lend their expertise.

Property Info:

3 bedrooms, 2 1/2 bathrooms. 2086 sq. ft. Built 1956.

Financial Breakdown

Purchase Costs

Purchase Price:

($315,352.03)

Purchase Closing Costs:

($9,352.00)

Total

($324,704.03)

Rehab Costs

Total Rehab Costs:

($45,000.00)

Total

($45,000.00)

Holding Costs

Monthly Holding Costs:

($2,391.00)

Total Days Held:

50

Total

($3,985.00)

Sales Costs

Sales Price After Fix Up (ARV):

$425,999.00

All Selling Closing Costs:

($1,660.00)

Real Estate Agent Fees:

($10,649.98)

Total

$413,689.03

Total Profit for Flip

$40,000.00

This property is in a great neighborhood in the desirable Fair Oaks area. Although it doesn't need a complete overall, we have plans for the landscaping and curb appeal as well as updating the bedroom in 2nd level to Master bedroom by adding closet and converting the 1/2 bath to full bath.

Some of the other changes we have planned are:

- Roof

- Paint/ Flooring/ Lights

- Open Kitchen Walls and bath remodels

We're looking to find the right financial investor to take our Family's dream of doing this as a team, as well as my extensive connections through working in Real Estate & Title & Escrow for 10 years, and making it a profitable reality for everyone involved.

We appreciate your time and consideration!

**Additional Details available by request!

Jeff S. · Answer

Hazard insurance? Title insurance? Conveyance Taxes?

With respect,  @Amanda Lawson, I question many of your assumptions and your P&L is incomplete, though only modestly.  Unless you paid cash, I don't believe you will make anything close to your estimate.

Your plans to convert a ½ bath to a full bath, roof, paint, flooring, lights, opening the kitchen wall, bath remodels, and landscaping, are typical of any moderate rehab.  Did your $45k estimate come from an experienced rehab contractor?  Unless this is a low-end project, which it does not appear, meeting a budget like this for this scope of work would be challenging for even an experienced rehabber.

In addition, it could easily take an experienced flipper 3 to 4 months for this scope of work.  Plus, once you sell, which will take time; a smooth escrow could take an additional month.  With little experience, I would plan on a six month flip at minimum and not be surprised at eight. No matter what, there is no way you will compress this entire process (plans, permits, construction, listing, escrow) into the 50 days you indicate.  With any typical hard/private money loan, holding costs here will greatly exceed the $3985 you plan.

Of interest is Derek Jones', observation that this property has been available for a while.  Did you know that?  Do you know why?  With a $365k project cost (purchase price plus rehab estimate) that's 83% of the ARV, you are overpaying.

Please don't misunderstand, because I'm not being cynical, but what exactly is an "elite group of area investors?"  I hope this is not where you're getting advice on this property.  If by "elite" you mean experienced, then I'm confused.  From what you wrote (which is all I can see) there's no way any experienced flipper would endorse this deal.

Please be careful, Amanda.

Gordon Cuffe · Answer

If you ever find a lender that will finance 100% of the price plus rehab costs, please tell me. I have never found someone that will do that. i have found one that will finance 90% of the purchase price plus a 100% of the rehab costs.

Chris Isaacson · Answer

I have a few concerns but I am also not trying to be a naysayer.

First your days held at 50, assumes you can complete the rehab in 20 days and accept a full price offer with a smooth escrow right out the gate.

Are you a real estate broker or are you planning to fsbo it because I only see one side of the commission?

Do you have comps to support that ARV because it looks like it maybe a reach and an appraiser could possibly hammer you down on price.

That is a decent amount of rehab for that budget which doesn't allow for any errors

Are you planning to keep the kitchen like that? I didn't see any remarks about cabinets/counters

If you were the ones who locked this up I wish you the best and hope it works out well. If that wasn't you than possibly look at 9019 Propeller Ct if you haven't already. Needs similar amount of work but is in a neighborhood that supports higher values.

Derek Jones · Answer

That's an interesting one, that home first came on my radar about a year ago.  Good luck! Are you looking for hard money lenders?

Africa Estrada · Answer

Hi Amanda, are you under contract already? I would love more details. My hubby and I would be interested in a joint venture if that is an option. We also have been taking classes and seminars and jointed the fortune builders group to educate ourselves more about rehabbing properties. So I find that we have lots in common with you. Even if we do not proceed with the joint venture I would definitely love to connect with you and build relationship. Please contact me.

Sergey Tkachev · Answer

@Amanda Lawson, I agree with some of the concerns mentioned above.  I think your numbers a really tight.  The rehab costs seem a bit low in relation to your scope of work - those number may be possible if you plan to manage the whole process yourself and buy the materials yourself, only hiring subs, but if you plan to hire it out to a general contractor, either the price will end up being higher, or the quality will be low.  So keep that in mind.

Days held is too short - I don't think it's realistic to complete your scope of work within 20 days, especially since this is your first project after getting back into RE.  Things will always take longer than expected and there will be surprises.  If you were planning to do purely a cosmetic rehab, the holding time may be doable but still very narrow.

RE commissions appear a bit low, especially based on the purchase price.

All of the factors above are very likely to cut your overall projected profit to half of what you stated, if not more.  And that assumes you can sell it quickly.  And you're missing the financing costs, which will most likely eat up what ever is left of the profit.  If you are looking to find a partner to bring in 100% of the money, I don't think you'll someone who would go into this deal as it is too risky.

I don't say this to be a naysayer, just sharing my thoughts based on experience, I think there is a chance you may make money but there is a greater chance you will lose money.  Be careful. :)

Gordon Cuffe · Answer

If you ever find a lender that will finance 100% of the price plus rehab costs, please tell me. I have never found someone that will do that. i have found one that will finance 90% of the purchase price plus a 100% of the rehab costs.

Amanda Lawson · Answer

Hi Everyone. So, I am using both the BP Flipping Calculator, estimating lender fees, running HUD's, etc to come up with my numbers. For some reason, I couldn't get everything to show in this post. As mentioned before, I did post the commission & days held incorrectly.

I try to only post some on here that I am not too sure about, so I don't bore people with every deal that I am running numbers on. At this point with this one, I am just running numbers, not in contract.

I am always looking at possible joint ventures! As my husband and I are just getting back into this, I feel like I am starting all over again as the market is so different now. I am always looking for lenders that will do 100% for my first couple deals (as I heard they exist...), however, I have yet to find one.

Any suggestions would be fantastic! Thank you again to everyone posting!

Amanda Lawson · Answer

Thank you, Gordon! For right now, I am looking for 100% lenders.

Chris - This was my first time using the BP calculator instead of my other one, so thank you for pointing out the commission and the days held. I haven't had a chance to see the property, but outside of the bathroom/landscaping/kitchen, I think the roof won't need a full repair. I had an estimate at about $42k, but was figuring this would be a really close one...hence the reason I put it on here.

I will take a look at the other one you mentioned. Thank you!

Gordon Cuffe · Answer

You can pm me for lenders in case you still need one. I dont have lenders that lend 100% though

Possible Flip in Sacramento Area (Ca) - Advice/Lenders?

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