Need some advice on a first flip

[Matthew Hudson]

what better place to go when you have a question starting then right here.

So here it is i have been analyzing a lot of deal and i came across a good flip opportunity in my home town. I am having an agent run more specif comos for the last six months but from what i found in my own research is as follows 

2bd 1 bath 1000sqft SFH

ARV 200k - 240k

Rehab 25k-50k (likely in the middle)

Asking 95k

I live about 2 hours or so away but going to walk though saturday morning and sounds very promising we will be able to sign that day as well but will still be negotiating final price. 

When i did the math conservatively

ARV 200k (low end comps)

Rehab 50k (overestimate)

Purchase  90k (little negotiating)

It plays into the 70% rule perfect and i really went conservative on the numbers. I would love to brrrr it but i need some working capitol for more investing so i think a flip is the best idea especially considering the spread for the investment....

I have hard money lending in place but will still need some money to get the ball rolling.

I am willing to do it by myself but was hoping to joint venture with someone more experienced. I am close and can manage the project.

What are some suggestions for funding the 25-35k to get it going if i were to do this on my own. Or do you have suggestions on finding a partner to fund that part for a percentage of the profits. 

How would you do it. I am bouncing around some idea but would like feedback on how other would do it. With a partner or without and why.

[Thomas Franklin]

Matthew Hudson Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc.

I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything.

ARV - Desired Profit - Closing Costs to Buy - Repairs - 10% of Repairs - Holdings Costs - Concessions - Realtor Fees - Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer).

ARV: After repaired value or what you think it will sell for once repaired.

Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable.

Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees.

Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs.

Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, property insurance premiums, property taxes, loan payments, HOA Fees, etc.).

Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV.

Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV.

Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these.

This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling.