Cosmetic Flip Margins

[Sean McCluskey]

Hey BP!

I am in the middle of my first BRRRR deal, and I think I've found a very low risk cosmetic flip in a nice high end suburb. Very low average days on market, definitely a desirable area to live, A to A- area.

My question is this: would you do this flip? Is this enough margin to account for the risk of getting into a flip?

3 bed 2.5 bath 2000sf 2 story vinyl home, 20 years old.

Purchase price: $150k

Potential rehab: $25k (paint, flooring, power wash, granite countertops for kitchen and 2.5 baths, convert loft to 4th bedroom). I think I’m way high on this estimate.

HML fees: 2 points, $275 application fee

HML funding: 90% of purchase plus rehab, up to 75% of ARV, at 9%, interest only payments, 12 month max term

Estimated total HML cost: $10,000

Commissions: $12000

Holding costs: $3000

ARV: $215-225k

Total profit: $15-25k

Thats 7.5% to 12.5% of total capital deployed ($200k).

But it’s $15/40 =37% to 25/40=62.5% return on my cash invested.

Help me decide!

[Sean McCluskey]

@Ryan Blake you’re also spot on that this isn’t a local flip. I’m investing out of state in Indianapolis, and I have a GC that I’ve met in person, who I believe is pretty professional.

It's a goal this year to try at least 1 flip with them, and if successful, to run up to 10 flips in the year as I try to raise the capital to fund a big BRRRR (or "almost BRRRR) portfolio of rentals.