First real flip

[Dennis Sprague]

I am closing on a property I just bought in 2 weeks. It is a old SF that was converted into a dumpy duplex and I will turn it back into a single. I believe that is where the money is in this area. Its was REO and I paid 48,000 for it and it is in a 110,000 area. The rehab estimate from the GC is at 43,000. I know this puts the numbers very thin. I was thinking of trying to knock around 10-15,000 off by getting with the GC and doing some of the work my self. There is no doubt that I can do the work but it will extend my hold time by a month for sure. How does my plan sound.

[Will Barnard]

$48k purchase (plus closing costs) with $43k rehab and a $110k exit is an 83% deal! With the exit at or around $100k, that is not even close to anything you should touch. Knocking off $10k by doing some rehab yourself and it only costing you $1000 extra in hold costs would make sense if it works out that way, but even with that, your margins are too thin, any mistake, any problem selling forcing you to lower price and all your profit and possibly money invested is gone.

With resale costs, you can expect around $7500 plus you will have holding costs (taxes, insurance, utilities, maintenance, and debt service if you take a loan). With only $19k gross spread, less acquisition costs, holding costs, and resale costs, you would be lucky if you made money.