Townhouse Flip Analysis

[Eric Davis]

Bank has foreclosed on end townhouse. The other end has just put their house on the market for $129,000. My realtor and I agreed that $115,000 should sell within a couple of months. I am looking at hard money lenders since I do not want to put up a lot of money for this property. HML that I have spoke with is charging 15% annually with 3.5 origination fees. Here is how I see the deal.

$115,000 ARV

$75,000 - Offer Amount
$ 5,000 - Repairs (kitchen appliances, flooring)
$ 2,625 - Origination Fees
$ 2,847 - HML holding costs (3 months)
$ 540 - HOA & Taxes (3 months)
$ 1,000 - Closing Costs (Buying)
$ 3,450 - Closing Costs (Selling)
$ 5,750 - Realtor Fees
$ 300 - Insurance
---------------------------------------
$96,512 - Total Costs

$115,000 Sale Price
-$ 96,512 Total Costs
------------------------------------
$18,488 Profit

Is there anything that I am missing or not thinking about? I feel very comfortable that this will sell quick because the area is nice for the price and townhouses typically are still selling in the $135,000 range. Did I calculate the HML amounts correct because it is much higher than I was expecting. Tips or suggestions? The bank wants our final offer by tomorrow.

[Michael P.]

So the property is in great condition other than flooring and appliances? Appliances are minor, less than 1k. What about flooring? Carpet only? Or do you need tile as well? If this is really all you are doing then I would be upset if that rehab took me more than 1 day to complete.

Here are some things you forgot.

HOA transfer fees, buying and selling.

The buyer is going to request repairs to be made. You might decline and take your chances that they don't walk, but I have never had a buyer not ask for something. Something usually equates to about a grand, and IMO I do pretty good remodels.

HVAC. Did you have this checked out? I never get my properties inspected so on occasion I get hit with some steep repairs. It is all factored into my buying decision so I take it with a grain of salt but you might not be able to.. Last house set me back 3.5k in HVAC repairs for a furnace and AC unit.

The house really is so nice it doesn't even need to be painted? I can't recall one foreclosure that was cheap that didn't need an entirely new paint job.

What I really want to know is if this house really only needs those two basic things why isn't a first time homeowner scooping it up within seconds. Everything I am seeing in that range in DFW if it is decently nice has multiple offers from first time home buyers. I ask this because I have a feeling you are missing something...or a lot of things.

Goodluck