What am I missing ?

Question

I am making calculations to make sure my numbers and choices can make me a profit.

The ARV is $109k to $129k.

I have priced all my repairs and selections, rehab cast are in $12,500 range, I added 20 0/0 to cover overages etc, so let's say $15k

My purchase price is $30k (city owns house and 700 others and the are dumping them for cheap)

So the cost I have included in caps are:
Sales commissions on back end
Original purchase price
Hard money interest of 14 0/0 paid monthly
Per diem over 90 days ( part of hard money deal)
The rehab costs
Closing cost of purchase and sale sides
Insurance
Taxes
Electric bill
Water bill
Might have a trash bill due to being in the city

What have I missed?  The sale price and hard money are accurate per my deal. And it's 1st flip!!

I plan on listing for $99,995

Thoughts?

J Scott · Answer

The big issue with doing that is that -- unless the end-buyer is a cash buyer -- you have to deal with the process of getting loan approvals, appraisals, etc, which can take several weeks.  Additionally, if the buyer is FHA, he may not be able to get a loan on the property if you're flipping it without making any improvements (FHA will ask for a list of rehab items with invoices).

Mark Yuschak · Answer

So the ARV is $129K and you bought it for $32K and expect to put only $12.5K in it?

Are you sure those numbers are accurate?  If they are, hats off to you!  But something doesn't sound right....

Jimmy C. · Answer

If you are missing something, you will just make a smaller net profit.

Sounds good.  Just do it.

Account Closed · Answer

yes, what's your rehab break down???  are you doing cabinets, flooring, painting, etc?  i remember yousaid granite in an other thread...same house???

Aaron Mazzrillo · Answer

If the city owns 700 houses and dumps them quickly, you may end up with a lot of really bad comps which will kill your ARV.

I would suggest sticking with numbers people understand and don't have to look at more than once to figure out.

Jason Davis · Answer

Mike G ,

Thank you for your comments.  I have decided to do the flip myself.  From my experience that what I enjoy doing.  Now ifni can make money doing it.  We will see

I also talked with the realtor who had a client who was looking in this area, we agreed to not show till I was closer to being done.

And is someone was to pick items for the house I would consider it but only with more of a none refundable deposit.  I will hold off till I have some more experience with flipping on my own.

I will set up a page to keep everyone updated on the house 
. Closing is set for June 15

Mike G. · Answer

Jason, be careful of trying to get a buyer before you even start renovations.  Not a lot of people are good at envisioning what the house will look like in the future - they just see the mess that exists now.  And if you do get that buyer on board and she later backs out, then you now have a house that has been tailored to one person, and others may not like her choices.

Congrats on finding this deal.  Someone here suggested flipping it immediately to someone else without doing repairs - i.e. wholesaling or selling to a consumer.  I'd suggest doing the rehab, because it sounds like you have enough buffer to cover some mistakes, and you will learn a lot more.

Good luck!

Jason Davis · Answer

I was planning on offering closing cost and I have a mortgage guy who has grant money available for down payment assistance.

Do you guys offer closing cost right off the bat or do wait for them to request it?

What other conSessions am I missing?

Steve Babiak · Answer

One item that isn't specifically listed in your original list of costs:

Seller concessions (up to 6% of sale price is allowed, I believe) that your buyer might want.

Jason Davis · Answer

The house was rehabbed 3 yrs ago.  It has a 3 yr old roof, windows and 3 yr old cabinets.

What am i doing:
Painting interior
Changing doors to 6 panel from flat
New carpet
New vinyl
New light fixtures throughout
Changing elec panel so I can install a new heat pump
Adding new counters( not sur laminate or stone, probably laminatr)
The bathroom is my expense- new tin surround, new vinyl, new toilet, new vanity and fixtures.

I have line itemed everything from HD and Lowes, Sherwin Williams.

The main thing is who was selling the house:  it was not listed for sale, it was not on MLS,  the city housing authority has gotten stuck with a ton of houses and they want to get rid of them.

I think I have a heck of a deal.

I will keep you posted.  My plan is to list at $99 ish.  I will hold an agents open house and see what agents think of a) my work b) pricing.7

What am I missing ?

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