Calculating Profit Fix and Flip

[Samantha Otero]

Hi everyone!

I'm currently looking for my first fix and flip property in St. Louis, MO. There are so many deals but I am struggling with calculating my profits using the BP calculator. I used the 70% rule formula, but after plugging in the cost of hard money lending, I'm having trouble estimating the profits. Does anyone have a formula or any suggestions? Also, any advice on how to calculate closing costs for when it's time to sell? Thanks! 

[Mike Klarman]

Fees across HML vary. It does because there's only a few direct lenders and the rest are brokers with lending sounding names. A broker is free to tac on as much as they want in points and they can even add their own fees.

If you look at it from a broker's POV, who have the stigma in society of being that sleazy used car salesman, if they make 2 points on every deal and they slap on a 595 Admin fee too than they'll be getting 3k - 4k in commission for every deal, at that point once you can always do 5 deals in a month, that's good money and you don't need a huge client base to do it.  Just a couple of active investors.

Fees you can expect:

Appraisal: 600 - 700

2 points: 2 points is fair and most brokers have a 1 point program with their lender and if a new person went to a lender directly the loan officer would sell you on 2 points anyway.

UW Fee/Processing Fee: Expect about 1,500 here between the two

Title Fee: Expect 900 - 1200 here for all the title work involved

Insurance: Most loans require the policy paid at closing, I do know one that will allow monthly payments which is crazy, LOL.

Holding Costs: Figure on making 4 - 6 payments on bridge loans to be safe

6% RE fee on sale: Deduct 6% of the sale price for the RE fees on the sale