Texas Flip costs (is this a good deal)

[Dusty Warner]

I went to my first REIA meeting the other day.... I was surprised to see that there were only 6 other people there.... The guy speaking was a wholesaler/flipper.... After about an hour of casual conversation about this ladies experience with her wholesale guru the speaker offered a couple of deals... Im still in the learning phase of marketing for deals and preparing for the possibility of a potential rehab project. Ive bought @J Scott 's books on rehabbing, but I was hoping to get some feedback on the amount of fixed costs this deal would have and what Net would be.... The Speaker was advertising a $45k-$50k profit, he obviously wasn't talking NET....

1011 Hays St. San Antonio, Texas, 3/2 1400ft

$163K ARV

$40K repairs

Price-$69,000

3-4 month timeline

Hard Money Loan

14% loan, Repair Funds can be financed, held in Escrow and dispersed on a Draw Basis as long as the Loan to Value criteria is met

• A $175.00 Inspection Fee will be charged for each Draw Request
• Loan origination fee of 3-5% of the loan amount
• Appraisal fee of $350.00
• Loan processing fee of $825.00
• Attorney fee of $300.00

PURCHASE COSTS??_________

HOLDING COSTS??_________

SELLING COSTS???_________

[J Scott]

I don't know enough about Texas closing costs or taxes, but I'll throw out some example numbers and you can tweak with the actuals:

Purchase Costs:

-  Loan origination:  $3000 (Based on 5% of loan value, which isn't clear)

-  Loan related stuff:  $1500 (Based on what was written above)

-  Inspections:  $400

-  Closing costs:  $1500 (No idea in your area)

Holding Costs:

-  Loan payments:  $5000 (Assume about 6 months worth)

-  Taxes:  $1500 (No idea in that area, but assume 6 months worth)

-  Insurance:  $600 (I'm assuming $100/month)

-  Utilities:  $900 (I'm assuming $150/month)

-  Lawn care:  $300 (I'm assuming $50/month)

Selling Costs:

-  Commissions:  $10,000 (Assuming 6%)

-  Closing costs:  $1000 (No idea how it's done in your area)

-  Concessions:  $5000 (Assuming 3% of sale price...no idea what's typical)

-  Home warranty:  $400

-  Staging:  $2000 (Always a good idea)

Adding all that up would put your fixed costs at somewhere around $33,000.

That seems high to me (20% of resale), but that's probably worst case, and you can figure out your own numbers based on what's typical in your area.

So, to determine your potential profit:

PROFIT = ARV - PURCHASE PRICE - REHAB COSTS - FIXED COSTS

PROFIT = $163K - $69K - $40K - $33K

PROFIT= $21,000

That's about 13% of ARV, which is just a little bit below what I look for, but again, the Fixed Costs numbers may be higher than the true numbers, and the profits/margins could therefore be a bit higher as well.

Overall, I'd say this is a reasonable/typical/average deal (based on my experiences) ASSUMING the numbers you provided and the Fixed Costs I calculated are all accurate.

I would suggest verifying the ARV, verifying the Rehab Costs and calculating your own Fixed Costs. If they all come out to what's indicated above, this would seem to me (again, based on my criteria) like a reasonable deal to pursue.