Mininum rehab profit?

Question

Rehabbers, what's the minimum profit you'd want to make on a deal?

As a new investor who's also looking to wholesale, it helps me do my numbers to determine if there's enough of a spread in a particular would-be deal.

J Scott · Answer

It really depends...

If you would have asked me 6 months ago, I would have said 15% of the sale price or $15K was my minimum, but that's when I was doing 20 deals per year with the average resale being about $100K and using my own cash.

Now, I'm willing do more expensive houses and am willing to make even less!  Yes, you read that right -- I'm doing bigger, more expensive houses and I'm happy to make less than I was on smaller projects (I'm going to make $7000 on an upcoming project and I'm happy with that!).

There are many reasons for this:

1.  I have one or more partners on most projects, so the work is split -- I'm happy to make less money if I'm doing more work;

2.  I'm generally not putting in any of my own capital anymore -- if it's not costing me anything, I can make smaller profits and still have larger ROI;

3.  I'm doing higher volume -- if I can do 50 houses with the same amount of effort where I used to be doing 20 houses, seems reasonable that I'd be willing to accept lower returns.

So, as you can see, there are a lot of variables that play into the decision of what your minimum profit should be, and unless you have all the facts, that number generally doesn't mean much.