Considering first flip

[Mariah Jeffery]

I have several properties that I bought to hold, possibly until death. Several of those were fixers, but I've never attempted a flip before. (When I say "I", I mean my team, which consists of my retired father and law and his friends. I don't actually do anything but do the analysis, pay the bills, and collect the check).

I recently learned over an opportunity that does not pencil out well for cash flow, but it looks like it could be a good flip opportunity. It's listed for $48K by the realtor I have been working with as a buyer's agent and trust immensely. He claims it's worth $85K-$90K, and would conservatively bring $80K in a quick sale (under a month, according to him). My team took a tour and estimated rehab costs at $3,700 and a 10 day timeframe to complete. There's not much wrong with it other than it being full of rodents - dead and alive - and their feces. Disgusting, but easy enough to clean up. New linoleum and storm doors, minor yard work and a new toilet are about all that's left.

Here is my analysis of the profitability of the deal.

Costs: $58,400
Purchase price: $48K (cash, no financing)
Rehab: $7,400 (double my team's estimate to be conservative)
Buying costs: $1,000 (title and inspection)
Selling costs: $1,500 (owner's title, escrow, closing)
Holding costs: $500 (utilities, property taxes, insurance for 2 months)

Proceeds: $80K price - 6% commission
$75,200

Profit: $16,800
28.6% return on the $58,400 investment in 2 months
Not bad considering I just write the checks. Ideally I will 1031 exchange and not pay taxes immediately on this profit.

What am I missing? Please tear this analysis apart.