Would you consider this flip?

Question

Last week I placed an offer on my first  fix-in-flip on a condo. I would like to get everyone's opinion on this deal and whether they would be interested. This will be my first flip. I would appreciate any guidance or tips.

Background: Last July I bought a condo for 245,000 in a downtown highrise. My unit was updated and had a open concept layout. The offer I have placed is for a unit with the exact original layout as the unit I own. My unit number is 502 the unit number Im trying to buy is 1102. Both units are 1300 sq ft, two bed/two bath. The flip unit will need a complete rehab. I asked my previous owners how much the rehab of my unit was and they said between 30 to 40k 
	
	The Deal:
	
	Offer $180,000

Rehab costs $40,000

HOA $450

comp price $245,000 (lowest end)

5% to agent/closing $12,250

HOA Expenes $2000

Low End Profit $10,750

Rehab details: Complete gut and rehab.

1300 sq ft of new flooring

Taking down two kitchen walls for open concept layout

Complete new kitchen

2x Complete new baths

Here are the recent comps for the same exact "02" units in the building.

Unit #  Price

2002 - $245,000

1902 - $245,000

1702 - $339,000

1102 - $299,999

302 - $245,000

Considering the above comps I think the place might even go for $260k. These condos do tend to have a long listing life which is my main concern. Some units go for outrages prices (1702 went for $340) and others seem to sit on the listing for a while. I believe the open concept layout has the most influence on moving the property.

To the experienced flipper what do you think of this deal?

What is everyone's favorite resource to estimate rehab costs?

Thanks,

Bryce

Deano Vulcano · Answer

Bryce, maybe because I`m an old time flipper, but I would NEVER tie up that much money, with that amount of rehab for a possible 10k, especially on a condo. And on top of that your first flip? Not in my lifetime. Valerie said it best, sometimes the best deal is the one you pass up. Be patient, my friend. Don`t flip just to flip, make a wise "business" decision. My minimum profit on a flip is 25k. If my numbers don`t work out for me to make that much profit....next!

Bryce Till · Answer

@Rizwan Alam thanks for you comment. This deal fell through but an "02" unit sold for 340k, which would be 120k. I was being conservative with my numbers. I think that one comp alone was worth taking a look.

Rizwan Alam · Answer

I don't know anything, I'm new and learning but that is by far the worst deal I have ever seen in real estate or anything else. You invest so much money, 30-45 days of work, and make 10K from over a quarter of a million dollar invested.

No no no.

Bryce Till · Answer

Thank you all for your comments. This deal fell through as the seller decided he wanted to keep the property. On to the next!!

Mark Ferguson · Answer

what about carrying costs and closing costs?  Are you paying cash?  Are there taxes? What about insurance?  Does the hoa cover all the utilities?

What are the sale dates on the comps and how long were they on the market?

Bryce Till · Answer

@Jaime Penix Thanks for your comment. I originally offered 160 and the bank rejected it.

The rehab estimate I have comes from someone who flipped a condo with the same exact layout. They did the same thing I would have to do, take out a wall, new kitchen and two new baths. They did use a interior design decorate which might have added to the costs.

Jaime Penix · Answer

I am not an expert flipper but you seem to have the same issue that I have been having, not having enough buffer to make it a viable deal. 10K is not a lot of wiggle room when dealing with flips. There is a lot of unknowns in your estimates. One, you are not completely sure of your renovation costs. You based it on a completely different renovation. Maybe you can view the property with a Contractor and they can give me a better idea of the renovation costs. If I was you I would offer 140-150k. If they don't accept, then that is no big just look for another deal.

Valerie Robinson · Answer

I do admire that you have the financial numbers associated with the property type. However, even with the numbers there are certain properties which I just do not favor and Condo's are one such property types. The best way to analysis the rehab estaimtation is to acquire software designated for such a purpose. I have found that Condo's you have to truly do a due diligence  financial analysis of the given asset ...sometimes the best deal is the one you you pass up!  Extend our best and hope that the deal is profitable.

Best,

Valerie Robinson

Bryce Till · Answer

@Elizabeth  C.   I believe 40k rehab a 245 list price is the "gone wrong" scenario. I live in the same building and with it being a condo I would hope to avoid any big surprises.

I need to really dial in my rehab costs which will be my next project.

With the below comps don't you think I'd get more than 245 for it? I have to think the unit that sold for 339,000 was completely redone.