I figure I'll ask now as opposed to later

[Steve Gregory]

Hello BPrs,

I'll start by saying that this would be my first purchase, I could purchase for all cash if there is a sufficient reason to do that, but I want to be prepared to make several offers. It's the creative offers that I'm having a hard time coming up with. I've analyzed the #'s as best I know how with my limited knowledge. My Exit strategy is to sell for profit after fixing up. I am a remodeling contractor, so that won't be a problem. I met with a hispanic realtor yesterday who is hooked up with the hispanic community and would find a buyer on a contract for deed for a 3.5% commission. She is doing that with another investor and looks to be moving desirable properties quickly with a good down payment and an above market sales price.

I am going to be looking at a SFR 3/1/2 that I have a lead on through probate searching. They say they plan to list soon but that I can look at the property. The house looks excellent on the exterior and after I see the interior I'll obviously have the complete picture. I believe the house is free and clear. Most houses in the sub are 3/ 1.5's and 3/2's , but there are several 3/1's and most of them are less sq ft (1,050) as compared to the one I'm looking at (1,244 sq ft.) The best sales comp I've found sold for $89K ($85/sqft) in May, also a 3/1/2 , but it is 196 sq. ft. smaller. So, If I use a conservative SP/sqft of $80, I come up with the following analysis:

Puchase price ($52/sqft) 65,000

Closing costs 2,000

Updates/renovations 10,000

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Total invested 77,000

Exit Analysis:

Sales Price ($80/sqft) 100,000

6% commission (in case the 3.5% doesn't work out) (6,000)

4 mos holding costs (taxes, ins,utils) (1,200)

closing costs (again) (2,000)

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Gross Profit 90,800

Less amount Invested (77,000)

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Net profit $13,800

Cash on Cash return (ROI)

13,800 / 77,000 = 17.9% (4 months)

How does all this look? If they don't go for the 65K offer, how could I creatively purchase and still come out with the same profit in the end?

[Account Closed]

That net profit is pretty thin and doesn't really allow for any unexpected stuff. I aim for at least $20-25k unless I am very certain of the numbers on the rehab and the sells price. Being your first flip, I advise against doing anything with such a small margin. A few unexpected things in the rehab or a few extra months on the market will eat that $13,800 in a hurry.