Deal Advise

[Edgar Stanislavsky]

BP Nation I need your help.

Disclaimer: I am very new to the RE investment game.

I have a fix/flip deal on the table that is mine if I want it. I've already invested $450K with these guys on two separate deals, they are very proficient and trustworthy but I've always had the same internal struggle. The issue is that I don't think that the terms are very favorable to me considering the fact that I am the investor that is coming in with most of the cash. I need to know from the seasoned investors if this is a solid investment.

DEAL DETAILS

SFR 4BD/2BA, 1500sf, 6000sf lot - Property is in a nice neighborhood in LA and the projection is that it will be fixed and sold within 4 months.

Total capital investment (purchase, agent fees, rehab, etc.) $382K

Projected sale price based on current comps after closing costs and commissions: $437K

My share: $232K which is roughly 60% of the total investment

My estimated ROI: $16,692 which is 7.2%

I would appreciate some input and guidance from all the BP members but I would especially like to hear from the BP superstars @will barnard, @Ben Leybovich, @Brandon Turner , @Joshua Dorkin and @J Scott.

Thank you,

Edgar S.

[Ben Leybovich]

@Edgar Stanislavsky In my opinion, the issue is not so much that your take is too low, but that the overall spread is too low.  On a deal which requires an investment of $382,000 I would want a profit margin of $75,000 - $100,000.  If a couple of things go wrong, the margin of $50k becomes $32k, at which time this makes no sense at all from your stand-point.

You are right, even if you get it 7% ROI is not good risk-reward. You need to be seeing a minimum of 12%-15% and preferably 20% for as much capital as you put at risk. Tell them to get the house bought for $75,000 less :)

Hope this helps.  Good Luck!