Assume that the market research has been completed and you are comfortable with the ARV. What profit percentage would you consider to be an acceptable margin after all costs of getting property ready for resale including carrying costs. (Net profit margin). Thanks for any comments.
Well like so many other answers…it depends. There are so many variables…location, type of work involved, holding costs…etc.
If you’re looking at a property that only needs paint/carpet then an investor may be willing to take less for less work.
If you’re looking at a full gut job rehab then an investor may want more for more work.
If you’re looking at a property that will quickly resell then an investor may be willing to take less because they won’t have the holding costs.
If you’re looking at a property that is in a higher price bracket or a harder to sell neighborhood then an investor may want more.
Investors don’t want the same things, they have different purchase criteria & different profit margins.
Reading through the posts on this board you will see prime examples where some wholesalers say they build in $15,000 profit for themselves, while others will build in $2,000-$5,000 just to get a deal done.
Use how much of your time/effort you are putting out as a determining factor. Calculate contractor oversight, work involved, holding costs, etc. to find a number that is acceptable to you. (Remember to set a portion of your profits aside for taxes). If you are a brand new rehabber, count on work taking longer and costs being higher than you may think.
Chris
Thanks for your response. I should have asked the question like this; After considering all costs of purchase, repairs or upgrades, holding, and selling, would a net profit 14-18 percent of market value be considered a good profit margin? Assume market value 150k-199k