Analyzing a deal.. please help me see if this is a good deal

[Amanda Glenn]

Hello all!

New wholesaler here! I have a deal that I want to put under contract! Please help me and tell me if these numbers are good! I know it doesn’t fit the standard 70% rule but because the earning potential is so great, I wonder if a buyer would mind. Thanks for your input!

ARV:900k (some comps recently SOLD for 1.1M)

Rehab: around 175k

Asking price: 505k BEFORE adding assignment fee

Also it is 4 people trying to work on it including me, what should our assignment fee be.

Is this even a good deal? Thanks guys! Look forward to seeing your thoughts!

[J Scott]

Originally posted by @Ned Carey:

@Amanda Glenn Watch the recent BP podcast with @J Scott. Now is not the time to be dong high end homes.  i would look very carefully at how many homes have moved int he price range recently.

Absolutely agree.  I wouldn't be flipping homes at 4 times the median price point in your market right now (median in Richmond is about $225K). Even if I were comfortable doing a deal at this price point, the numbers here aren't very good.

Assuming the $505K purchase, $175K rehab, 12% of ARV in fixed costs ($108K) and $900K ARV, that leaves a profit of about $112K in profit. Which is about a 12% return on resale value. I might do a deal like that when the market is really strong, but not today. The market could easily drop 12% during the course of this project, and then you're underwater on a $900K house that wouldn't come close to cash flowing as a rental and doesn't really have a Plan B.

Now, if you're wholesaling the deal, there's not much risk for you.  But, I'd be willing to bet you won't find a buyer above your contract price, so you'd likely be wasting time that could be better spent looking for another deal.