Would you invest in this deal?

[Stephen Weber]

I hope to create a network of investors so we can all get a little more of what we want; experience, deals, success. In that effort I want to lay out the details of a deal I am evaluating. The numbers:

Purchase price: $181,000

Rehab: 75,500 (includes a contingency factor of 10%)

All in: 256,500

ARV: 325,000

Timeline: 60 day rehab schedule

We have an experienced selling agent who has agreed to list the property on the retail market at 4.8%.

We calculate our profit like this: 325,000 (sell prices) – 15,600 (sales commission)  – 256,500 (purchase price + rehab) = $52,900

Of course we may not realize full asking price, and we might be asked to pay concessions, but these are the values we are using. We will give some profit to our contractor to incentivize the work quality and schedule. This isn’t a ‘home-run’ but feels like a solid single. Questions and/or comments are welcome.

Analysis:

256,500 invested

$26,450 profit anticipated (after split)

Return = profit/down payment, so:  26,450/256,500 = 10.3% in ~90days.