Updated over 10 years ago on . Most recent reply
Deal Analysis Help
Hi All,
I am bidding on a foreclosure and it looks like I am in a multiple bid situation so the bank is asking me for my best and highest. I am a little nervous as I don't have firm numbers on the rehab. I did my best to analysis it and this is what I have. Let me know your thoughts if I you think I should increase my offer:
Purchase Price 56,250 (current Offer)
Rehab costs (double my original estimate) 60,000
Holding Costs (includes taxes) 11,500
Selling Costs 15,000 (estimated at 10%)
ARV 150,000 Conservative 175,000 on the high side.
Most Popular Reply
150k * .7 = 105k
$56,250 + 60,000 + 11,500 + $15,000 = get out of this deal
or $142,750 and you aren't too firm on that number.
If you believe the number above to be accurate, run away and do so quickly. This is not a deal worth looking at.
Flips need a much stronger evaluation than "back of a napkin." I'm guessing you aren't a contractor given the generality of your rehab number. Pick up J. Scott's book on rehabbing, it will lay the ground work for your flipping rehab knowledge. $60k could do 4 full 1 bed apartments in crappy everything or 1 high end kitchen in a Boston suburb.
Where did you get your closing costs number? Beyond the 6% you'll pay a realtor, what encompasses the remaining 4%? Are seller paid closing costs the norm in your area?
Did you run comps? 150-175k is a broad number. You should be able to narrow this down to a 10k range at most.
You want to go from "I'm a bit nervous" to "Hey BP, I've got this place in Conifer, CO that should cost me $121k all in (see numbers below) and comps are running at $165k. But my place has an extra deck on the back. Do you think I could get another $4k in an slowly/moderately/quickly rising market?"