REO Flip do able?

[Matt Welch]

Been reading a bunch on here lately and wanted to see if I am running the calculations correctly for a hypothetical flip.

Cash Outlay: $50,340

Purchase price: $160,000 (10% FannieMae Homepage Renovation Loan)
Rehab: $15,000
Buying costs: $6,600 (is this way too high?)
Selling costs: $8,600
Holding costs: $4,140
ARV (sales price): $220,000

Profit: $25,660

1) Assuming my estimates are correctly am I calculating things correctly?
2) Would any of the pros out there pursue this flip or are the margins too small?

Thanks

[Jon Holdman]

Can you really use that Fannie Mae loan for a fix and flip? I thought those were only if you're living there.

ARV = $220K
Purchase ($160K) + Rehab ($15K) = $175K.
That's 80% of ARV. Knowing nothing more this looks like a bad deal. If you truly can get cheap financing, say at 5% with one point, you'll save a bunch of money and might turn a profit. If you were using hard money this would be a break even deal. Hard money would cost you about 10% of the amount borrowed, or about 7% of ARV. With 5% and one point you're looking at 3.5% of the amount borrowed, or only about 2.5% of ARV. So, this one might generate a profit around $10-12K. Certainly not $25K.

Your selling costs is likely to be closer to $25K. That's 6% for commissions, 2% for closing costs and 3% for seller concessions. Maybe if you use a flat rate listing and do the marketing yourself you'll save the 3% listing side commission.