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.

[Jeffrey K.]

I dont think this is a "slam dunk." How much will this rent for when you cant sell it? Are you FSBO or going to list it? People will not be able to finance it if you turn it around in a month and only put 3k into it. Are there many cash buyers? Do you know it is worth what your realtor says or are you just taking him at his word? Don't want to burst your bubble, but flips are risky.