possible deal overview, PLEASE HELP!! FIRST DEAL

[Cristhian Acosta]

heres the deal: im working with a wholesaler/ (licensed) realtor. i brought a property to him for a fsbo. the seller said he bought it 2 years ago for 160,000. says its in moving condition and needs liitle to no repairs so i figured at least 10,000 for repairs. my partner looked up the comps and says that the ARV IS 175,000, but we can only pay 80-90,000. do these numbers sound correct?. and he says that hes trying to gross 20,000 profit to split 50/50 between us. he says he can give me a jv juncture or non-compete, non disclosure agreement. either of those should protect me right? as far as protecting myself: how do i protect myself in this scenario?
and as far as numbers go: how do i figure out what my profit should be and can anyone give me a step by step on how i would break down all the calculations of this particular deal?

ARV is 175,000:

175,000 times .70 = 122,500
122,500- 10,000 for repairs =112,500.

112,500 - 20,000 for me and my partners fee. 50/50 = 92,500

shop to buyers for 90,000-92,500.

do these numbers sound correct? thanks in advance

p.s my first deal

[J Scott]

Here's my formula (pure common sense) for analyzing a flip:

MPP = Sales Price - Rehab Costs - Fixed Costs - Profit

MPP is "maximum purchase price"...and the other costs should be evaluated very conservatively just to be safe.

Now, if your numbers are correct, then Sales Price is $175K and Rehab Costs are $10K.

I don't know what your Fixed Costs are, but generally, for a house in that price range, you're probably looking at Fixed Costs in the $10-20K range. This covers closing costs, loan costs, holding costs, agent commissions, buyer concessions, etc. -- basically, all costs you'll incur throughout the project other than rehab costs.

So, let's assume Fixed Cost are on the high end at $20K.

Also, you said you want to split a $20K profit.

Therefore, your MPP is as follows:

MPP = $175K - $10K - $20K - $20K

= $125K

So, if you're purchasing this property to flip, you wouldn't want to pay more than $125K.

That said, are you sure you're being conservative with your costs?

Can you really sell it for $175K? Or is that using the higher end of the comps? Also, what is your likely DOM at that sales price?

Are you sure $10K is enough for rehab costs? Have you seen the property? Have you gotten contractor bids?

You should figure out your own Fixed Costs. Here is how mine are broken down on a typical house I purchase:

http://www.123flip.com/education/calculating-fixed-costs

Do the math for your situation, and figure out what your Fixed Costs will be.

Once you are very confident with your numbers, plug them back into the formula, and you'll be able to determine your real MPP...