How much profit makes a Flip worth it

[Nicolas Savvides]

Hi All,

Long time BIGGER POCKETS reader and podcast listener here. I recently did my first House Hacking deal - it is more like a Live-In flip where I purchased a property that I live in with my partner using all of our own cash.

I used my knowledge as a construction manager and architect in training to run the whole project and ad some value to the property.

6 months later some buddies recruited me to help them flip a much bigger property. After analyzing the deal, considering there are 4 people in on the deal - the net splits would be 17 - 25k per person (modestly, playing it safe - it can be a lot more if the market explodes). I am not putting any money down but I would coordinate the entire reno. I also have a full time job. 

I am ambitious and love the idea of doing it for the experience as it would be my first time doing something using OPM. Some more seasoned mentors have said it's not worth the returns and to walk away.

Does anyone have any advice on this situation? What margins would you walk away from? This is a 1 family house on an acre with a separate 4 car garage and 100sf shed. 

- eager yet patient real estate yellow belt 

[Darius Ogloza]

Use your hourly rate as an architect and manager and estimate the number of hours you will put into this project to determine the "cost' to you of undertaking this project.  Then compare that number to the expected recovery from the sale of the project.  Adjust for taxation effects (e.g., will you be responsible for FICA taxes on the project as you would for selling your services).  Not much to it, really.  If your calculations lead only to a breakeven or slightly better (or slightly worse), you may want to undertake the project for the experience you will gain.