Flips & What's a good profit?

[Pat Ayres]

Hey everyone at BP,

I am working on my first (non live-in Flip). As it stands now with rehab costs, holding costs, Closing costs, & paying the buyers agent, I will net out at $33,000. Since I am not flipping as an LLC, I will declare the income & add in all my deductions, in addition to my w2 income, should I expect to pay much on that $33,000? Also, with this being my first flip, is a spread of $33,000 pretty good or should I really pinch pennies and try and push closer t0 $40k? Let me what you guys think or if you have any advice. Please link any and all articles or books where I could get a better knowledge of what I am getting into! Thanks! - pat

[Jay Orlauski]

I would look at what YOU think your time is worth - in other words no one can really tell you what a good profit is because everyone is different. Many people like to use percentages and cap rates and what not - but in the end - the only thing that really matters is " are you satisfied with what you got paid for the amount of time that you out into it? "

How many hours of labor did it take to make that $33K ?  Does it feel like it was worth it to you? would you do it again if you had the chance?  Do you have partners that you are working with that expect a certain amount of return?  these are things that can factor in what is a good deal for  you. 

I look at the percentages and cap rates - but really when all is said and done I like to feel like what I put in my pocket at the end of the day was worth it to me. remember 1% can be $10 or it can be $10,000 - so really what does that mean to you?  what matters is how much you can pocket - and whether or not you could have earned the same amount with less effort.  How do your real estate returns compare to what your bank CD will pay you? or some tax free bonds? are you beating those rates? Are you comfortable with the amount of risk you are taking?  These are all things to consider when thinking about how much you should profit.  I don't think anyone else can really tell you what a good profit is for YOU. ( aside from the fact that it MUST exceed your expenses)  

If you can get an education about how to flip a house and walk away with $33k - may not be such a bad deal - I know people who have paid TWICE that  - just to learn from a guru how to do it.