first flip

[Levi Gale]

Hey BP,
I’ve decided to try my first flip, and have had an offer accepted on the property. Its not a great deal, and will not net huge profits, but let me know what you think.

House- 51,000
Closing (est) – 1500
Rehab (est) – 8,000 will budget for 10,000
Utilities (est) -500
Total cost – 63,000

Several comps in the immediate area (good sign?) the lowest was 75,000 the highest was 102,000 average came out to 84,000 using the 6 best comps.

Sale price (est) – 84,000
Agent fees (est) – 4,000

Pre-tax profit – 17,000

I feel that I have been fairly conservative with the sale price, but I guess that will depend on how the rehab turns out. If I missed anything please correct me, and again its not the best deal and not big profits, but what do you think will it make a decent first flip?

[Gregory Childs]

First of all congrats for getting something under contract - hopefully you have a contingency in the contract.

Your one big issue is that you don't sound confident in your numbers. Once you have a contract in place, time is of esscence to confirm your numbers.

Step I: Get at a minimum a desktop appraisal done (sub $100). Provide the apprasier with the rehab punch list you have established and have him provide you a projected ARV. He will use local comps to establish this #.

Step 2: Get over to the house today with a couple of GC's and get a firm bid on the project including timeline and financial breakdown (draw schedule, etc.)

Step 3: Identify your exit strategy (retail flip, wholesale flip, landlord flip) and what your actual sales price will be. As a guide 80% or ARV for retail, 60-70% of ARV for investor, wholesale.. whatever you can get committed from someone.

Step 4: Run the numbers - FYI, in your analysis (for a retail flip) you missed clsoing costs for the "C" transaction, seller contributions, and punch list allowance.

Step 5: buy a large Mocha Frapachino and work the numbers backwards and forwards.

Step 6: Decide a. to run for the hills, b. to go for it, c. to see if you can assign the contract if it looks decent for w wholesale flip.

We did two or three deals in AZ last year, made OK on two and lost money on the third. The market was VERY unstable - I wouldn't touch this if I didn't have a 30% margin.

Remember this is a business designed on the premise of making money - get your ducks lined up in advance or get out of the water and lookk for a new place to enter.

If you think it is "skinny" now - why risk it? The right deal will come along if you look hard enough.

TTFN,

Greg