Our first flip 3/2 single house, need guidance

[Andres Manco]

Me and my wife just found this house, which we are thinking of buying with a conventional loan with 5% down.

Cost:                                       $238000

ARV aprox: $310000

Rehab aprox:                              $25000

Closing cost aprox:                    $10000

Inspection:                                       $890

Appliances aprox:                        $2000

Appraisal:                                        $600

Buyers agent comision:               $6200

2 months of mortgage aprox:     $4140

Total Cost $287040

The rehab is mostly cosmetic: paint, remove carpets, change floors, vanities of 2 bathrooms.

With this numbers we could make $22960 

We were hoping to have the property ready in no longer than 3 weeks after closing and sell it in less than 2 months.

What we are most scare of is the changing market. Knowing that the interest should get higher. We might have to sell for lower.

Do you think we should go through with this deal or wait for another?

If you can be specific of why I would greatly appreciate it. 
Also point out any mistake on my calculations, etc.

Thank you in advance

Andres Manco

[Andy Sabisch]

Being your first flip, your schedule is ambitious.  Have you validated the time to get carpet ordered and installed . . . since you do not want to buy it until you own the property, I doubt you will get it that fast and installed.  Even Home Depot or Lowe's will not get it installed in 3 weeks from when it is measured.

NOt sure where this property is but $10,000 for closing costs????  Have you talked to the person that the bank / lender uses and ask for their closing sheet?  That number is high.  Then you have the appraisal feel which is part of the closing costs . . . why separate?

The inspection fee of $890 - is that a home inspector?  There is a new thread that was just started that talks about pros and cons for these and you would be better off going straight to the professionals that the inspector will tell you to call anyway.  But again, $890 is high.

As far as the buyers agent commission, if you sell for $310K, that is a 2% commission and very few areas support that rate . . . 3% is the norm unless you have a track record with an agent and being your first flip, does not sound like you do.  3% bumps the commission up to $9,300.

You time frame of sell within two months of buying is overly optimistic based on the market today (and interest rates going up will make it worse).  Even if you get an offer right away, you have at least 30 days to close, 

To cover yourself, you need to hope for the best but plan for the worst.  What if interest rates go up and the buyer pool shrinks more.  Will your cosmetic flip stand out and grab buyers or sit for 6 months which we are seeing in multiple areas.  What if the carpet comes in and is damaged?  We had this happen in a flip earlier this year and it added another month to the project. 

Does you reno budget of $25K include a 10% to 15% contingency amount?  If not better add that as it will be used - always does.

I would run the revised numbers through one of the BP calculators and see what your return is . . . . using your numbers, you have a decent downpayment, will need to cover the reno costs and face an uncertain sales market 3-4 months down the road.