Deal Anaylsis Fun

[Glenn Espinosa]

I've been putting in a lot offers recently. No luck so far although I am waiting to hear back from a 2 agents at the moment. A lot of houses in my area are going for a lot more than I'd like to spend and therefore I'm trying hard to find areas in my estimates where I can find room to increase my maximum purchase price. In the end the numbers don't lie and I don't intend to find myself on the wrong side of a bad deal.

So for fun I was hoping others could analyze the numbers I've come up with on one particular property I will be putting an offer on tomorrow.

The property is a single story 4/2/0 with 1,629 sq ft in a really desirable area. It was built in 1978, has really nice cathedral ceilings, near a popular park and in a subdivision with a great school system. Houses in this area have been going in less than a month for the most part. Asking price $150,000.

The plan is to do a mainly lipstick renovation. I'm considering unconverting the 1 car garage but will have to do more research on the value that adds. My GC's are putting together bids but rough numbers from them are right under 40k. I've budgeted 43k in my estimates.

Here are the main numbers:

1 Eventual Selling Price: $215,000 - 100%
2 Quiet Costs: -$36,685 - 17%
3 Improvement Costs: -$43,000 - 20%
4 Minimum Profit: -$18,000 - 8%
Maximum Offer: $117,315 - 55%

The Comps:

[b]floorplan...sell date....price........DOM.....sq ft......price/sq ft
4/2/0.........6/13/12....$195,000......10.....1,629......$119.71
4/1.5/1.5.....5/24/12....$198,450......29.....1,146.....$173.17
3/2/0..........5/14/12.....$219,900.....179....1,695......$129.73
4/1.5/1......10/3/12.....$194,900.....21......1,345......$144.91
4/2/1.......5/24/12.....$210,000.......?......1,530.......$137.25
4/2/1.......8/14/12.....$214,000......57.....1,643.......$130.25
4/1.5/1.....3/27/12....$220,000 ......11......1,403......$156.81

I have talked to hard money lenders and I think I can get $130k @ 12% for 6 months and I accounted for 3 points although I'd definitely would like to pay less in points (I'd love to hear from other lenders). So by financing 130k I will be putting 30k cash into this deal.

Now I am convinced that these are pretty rockbottom numbers. If worst case scenario I make 18k on my 30k in 6 months or less then I'll be happy and the ROI is good.

Are you guys getting similar percentages when flipping a house in this price range? I was always under the impression that when you start hitting the $200-215k price range that you should expect more profit.

P.s. I know that the ARV is low as the avg price/sq ft is $141. I like being conservative although I will definitely rework these numbers once I get my rehab bids back.

Any thoughts are welcomed. Thanks!

[Andy Bankston]

Glenn, if you are not doing a substantial rehab then maybe you could consider cutting out the overhead of a GC to improve your profits. For a simple garage unconversion and light rehab you should be able to find some referrals, check out their work and hire the subs yourself. Just my .02
Good luck,
Andy