Equity Partner - Average ROI - Advice on scenario

[Ryan P]

Purchase price is $25,000

Rehab and holding costs: $10,000

Sell Price is $50,000

Time elapsed from buying to selling: 90 days

If investor is loaning all $35,000 -- what is the reasonable / average amount you would pay them back total on their investment?

They are having me do all of the logistics, supervising the rehab, closing escrow, etc...They want to be hands off and are looking at this as a straight investment opportunity.

I am now just getting back into RE flipping and want to know what the market is bearing right now. Look forward to hearing back from you all and getting back on BP more often! Thanks in advance.

[Michael Seeker]

Originally posted by @Ryan P:

I have a lot of RE experience, just on the mortgage side.

Pretty sure @J Scott was referring to rehabbing experience. I'm not sure what this statement means exactly, other than you've probably sold or underwritten a lot of loans maybe? From what you've said so far, I get the impression you've not done a flip before, is that accurate?

Low or no risk is not ever the case in house flipping, especially if you've got a budget of $10K to work with. If your exit price is $50K you're looking at netting maybe about $45K after closing fees and commissions. So your profit margin is down to $10K assuming you're right on with your numbers. Does your budget have any room for overage?

I think the terms @J Scott laid out would be very fair - if you have no experience and no skin in the game, I wouldn't be agreeable to lending any money on it. If you can get somebody to lend you the money, then it's likely not at terms that are really fair to them for the risk they're taking on.