148K profit on 4266 Washington Blvd, Saint Louis, MO 63108?

[Collin Emerson Miller]

I have been researching properties for potential fix and flips and I came across this property...and I wanted to get some thoughts.

There was a fire that severely damaged the building and now the price is listed at 129K for 7 beds and 3 baths and 3,075 sq ft ($41.95/sq ft).  This property is down the street, and is selling for $415K, has 6 beds and 4 baths, and 3,380 sq ft ($122.78/sq ft).

If the fire-damaged property was rehabbed and the price per square foot was the same as the reference house, it would be worth $377,548 (3,075 * $122.78).

If it cost $100,000 to fix the house, that would put the all-in cost at $229,000, and if the 70% rule is applied, then the max list price is $264,284 ($377,548 * .70).  

So, in the end, sells for $377,548, money in was $229,000, which is about $148,548 profit.

Does this make sense? The profit seems too high to be right. Would it cost more than $100,000 to fix the house?  Are any of the calculations off? Other thoughts?

[Will Fraser]

Hi @Collin Emerson Miller, something seems off.  First, I suspect the rehab costs will be higher than $100k in light of 1. fire damage remediation and 2. having a kitchen and three bathrooms.

Second, you'll want to account for "costs of sale" and "costs of project" when thinking through potential profit.  It will cost you something to sell the home (think realtor commissions, title company fees, gov'ment cheese, etc) and it will cost you something to do the project (think holding costs, like the interest you'll pay on the loan while the project is happening)

So, when you think of selling for $377,548 (if indeed that is viable), you'll want to take something off the top, say 7.5% to represent all costs of sale?  This would leave you with . . . $349k, and then once you account for the holding costs you'll be looking at a more realistic profit projection.  

You'll still need to work on the other side, too, and get a solid estimate of the rehab costs.  

I hope this is useful to you!