money to make on rehab?

[Tony Zamberlin]

Whats a good amount "net" to go with to do a rehab. minumum amount? say on houses that retail from 80-140k and then houses that retail for 200k to 500k ? :D

[Jon Holdman]

A quick and dirty rule of thumb is that if your purchase price plus rehab costs are 70% of your selling price, you use hard money to finance the deal, you use an agent to sell the property, and you have six months close-to-close, your profit should be about 10-15% of the selling price.

To break that out a little, it looks like this. Assume the ARV and selling price are the same:

Purchase plus rehab: 70% of ARV
Purchase closing: 1.5% of ARV (about 2% of purchase price)
Points plus interest: 7% of ARV (about 10% of the amount borrowed)
Holding costs: 1.5% of ARV (insurance, utilities, lawn care, etc.)
Sale closing costs: 2% of ARV
Selling commissions: 6% of ARV
Total: 88% of ARV
Profit: 12% of ARV