Flipping profit

[JAMES Coleman]

I've been studying BP lately and have a question I've been unable to answer through my search.

My wife and I stumbled upon a good deal on our home two years ago, renovated it, and are listing it for sale next week. We have done 90% of the work ourselves and hope to realize a net profit of $35k when we sell (that is the number I arrived at after deducting all associated sales and renovation costs).

My wife and I have a strong desire to continue in our real estate investing, beyond our primary residence. One point of consideration is we love doing the renovation work ourselves but it's slow and physically taxing. For our next deal (other than our primary residence), I'm toying with the idea of utilizing seller financing or a hard money loan to finance a rehab property that we aren't also living in.

My question: assuming all contracting work is hired out, what is a good rule of thumb for estimating profit on a flip? I value time and money and if I can do one flip per year doing the work alone versus two or three hiring the work out, I would rather hire it done! That being said, I'm not opposed to a little hard work and "payment of dues" to learn what we need to learn to be successful.

Thanks for your thoughts,

Jim

[Luis A.]

I started out flipping houses with the "$20k per house goal". But then I learned that for some rehabs $20k ain't really that great while for others $20k could be too ambitious. So now I have learned that the desired profit needs to be tied to the complexity of the rehab.

Just saying I want a $20 k profit can be deceiving....

What if you can buy a house for $50k, rehab it for $10 k and a week of your time and then walk away with $15k. Would that be worth your time? ...It would be worth mine :mrgreen:

On the other hand you buy a house for $100k and rehab it for another $80k over 3 months including mold remediation, foundation repair, permitting and changing all the major systems in the house...possibly adding square footage. Would you be Ok with walking away with a $20k profit?...Hell no, I would want a lot more than $20k for that much work and time.

The point is the profit needs to be tied to the complexity of the rehab AND your goals. A 20% ROI is a good starting point but also add a premium based on the square footage of the house and the total cost of the rehab.

Why square footage?...

Because a $50k rehab budget in an 1,100 sft house probably means a lot more complexity than a $50k rehab in a 3,000 sft. house.