Looking for advice on our first house flip

[Kirsten Braddock]

My husband and I are looking to purchase our first flip property. Im looking to get advice on the numbers to get some insight from more experienced investors.

Here is the breakdown:

SFH: 3/1, 1177sf

Acquisition: $80k

Reno estimate (from contractor): $25-30k

Hard money terms: 12% / 3.5points (will loan $90k)

ARV: $135k

Realtor fee: 6% (to sell)

Homes sell in about 45 days

The owner doesn't want to sell for less than $80k, but I don't think that gives us much space if reno costs creep up. We would like the opportunity to work our way through our first flip, but I'm nervous since it is our first one. We are buying directly from the seller, so no RE commision on th buy.

Any advice for a newbie flipper?

[Ryan Blake]

Since you are a pro, use the calculators provided under tools to help but here is my quick rundown on a post-it:

Buy = $80k

Rehab = $30k

HML Points = $3k

HML Interest = $3k (assuming 90 days held total)

Holding Costs = $1,500 (assuming 90 days electric, gas, water/trash/sewer, builders risk ins, prop tax)*

Selling Costs = $10k (6% relator fees, 1.5% closing costs)

Sale Price = $135k

Profit = $7,500

*I am taking a very high level guess on your holding costs

For me this is WAY too thin of a margin. If your rehab is off by even a little you are taking a loss. I don't go into properties without a 15% profit compared to ARV and a floor profit of $18k. And I am probably on the lower end on both of those numbers from most big time flippers.

Ways to make this work:

-drop your offer by $5k or tell them you will pay $82k if they carry finanincing for the project with an interest only loan at 10% (will net save you $4,000)

-get at least 2 more quotes on your rehab (may save may not)

-if this is an mls property, ask the agent you are using to buy if they would be willing to list the property for 2% because they will make 3% at the sale and more on the back end (will save you $1,300)

This will move your profit up to roughly $13k which is a little bit better but still cutting it close. As long as you are sure on your home inspection and on your ARV, this might be a keeper. Just be careful of thin margins because they can turn into losses quickly.