Input on a potential flip

[Austin Latty]

Hello folks,

I would like input on a potential property to flip. I came across it from a wholesaler. The asking price is 56k, and the ARV is between 120-130k. Ive had a GC take a look, and seems like 20k rehab cost (mainly cosmetic/updating). Minus the commissions/closing costs it seems I can make 40k or so. Am I missing anything here or does this sound like a good deal?

[Andy Sabisch]

A few things to be sure you factor in to the decision . . . .

1) Is the 56K before or after the wholesale fee . . . . that will start to tilt the numbers

2) Who came up with the ARV? Be careful about taking the ARV from the wholesaler . . . they always want the deal to look the best so get a third party estimate before you bank on that ARV? And as we have seen, be careful about relying on Zestimate values :)

3) What was the GC looking at for the $20K estimate . . . was that what the finished work would cost you with him overseeing the work?  What contingency did he set aside as there will always be that unexpected surprise you never saw coming (dealing with that now myself).  If there is no cushion, you need to put as a minimum 10% aside for that - great if you do not need it but better to be safe than sorry.

4) How are you planning on financing the deal (purchase + rehab)?  With the total amount you are talking about, many HMLs will not want to deal with a small project unless you have a solid track record with them and even then, all in under $100K is harder than a $250K project to get financing . . . found that out the hard way looking at some lower price properties to flip.

5) Make sure when you when you run the numbers (and use the BP calculator) that you are realistic in the time it will take.  We are finding that some items may take weeks to get that once were pickup the same day items and that can cost you in carrying costs.  We just had carpeting put in a flip that was supposed to be a 2-week delivery and took 2.5 months to get in.  We just ordered carpet for a Buy and Hold and made sure to ask what we could get fast and adjusted our selection on the answer.

Hope this helps . . . feel free to ask any other questions before you pull the trigger