Deal Analysis Help

[Daniel Levine]

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.

[Aaron Montague]

@Daniel Levine

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?"