What profit margin are you expecting?

[Jason Grote]

I am very curious as to what profit margin other rehabbers are looking for and how they calculate it. I will go ahead and bare my own strategy:

This is assuming the purchase price of the home is between $80k-150k...
If the rehab takes 1-2 weeks we look for a $20k+
If the rehab takes 2-4 weeks we look for a $30k+
If the rehab takes 4 weeks+ we look for a $40k+

I know this is probably a very strange strategy, but it works well for our business model.

I am curious how other rehabbers determine their margins??

[Will Barnard]

I use different formulas than what has been posted, however, Jason's 15% of exit price for profit margin is about what I end up with too.

My formula is Exit value (ARV) times 75% (.75) minus repairs. That is the most I will pay and usually end up with 15%-25% cash on cash return based on acquisition plus rehab money invested.

From there, I also factor in length of rehab time, so on complicated or longer rehabs, I will use a lower number like 72% or 70% or whatever to account for my risk. I also make adjustments for acquisition prices. I don't ever do sub $100k properties so I have larger amounts into deals, but also have larger margins.
Most of my acquisitions range from $200k on low end to $900k on high end with a majority in the $250k-$400k range.

I don't particularly like your formula of $10k more for another 2 weeks of rehab, but if it works for you, then go with it.

My advice is to know all your holding and re-sale costs so you know at what % you need to be in order to net your desired return.