Are my numbers totally botched?

Before I get in over my head, I’ve been trying to understand the numbers to rehab and sell a house that appears to be listed at about 50% of FMV.
I thought an asking price like that should insure I would get paid in the end, but it sure looks like after 6 mo. of work everybody else would get paid, but I would come out loosing about $1,700. Worse yet, my calculations don’t include sales tax on the property because I don’t understand where that comes into play, nor how much it would be.

Here’s what I’ve got.

List price = $59,000
After Repair Value = $120,000
70% ARV HML = $84,000
$$ available for repair aft. Points, fees, 4 mo. Payments deducted up front = $73,920

Repair costs = $27,000
6 pts. = $5,040
Carrying costs over 6mo. = $3,800 (after 4 mo. up-front payments)
HML 14% int = $11,760
Amount of repairs not covered by HML = $14,920
Realtor fee @ 6% of sale price = $7,200

  $120,000 ….. asking price
  • $  84,000 ….. subtract loan amount
  • $  11,760 ….. subtract 14% int.
  • $  14,920 ….. subtract out-of-pocket repair costs
  • $    3,800 ….. subtract carrying costs
  • $    7,200 ….. subtract realtor fees

= $ - 1,680 …… what I get paid

Do these look like the numbers everyone else is getting,
or am I doing something seriously wrong?
Also, where does sales tax fit into the equation?
That should make things look even more dismal.
Anything else I’ve forgotten?


In most states that I know of, transfer tax is 1% of the consideration or value (if there’s no consideration). Usually the Buyer and Seller share this expense. In your case, it would be $590.

The 14% interest would be for an entire year but you only indicate 4 months on the other holding costs. If you will be rid of it in 4 months, the interest would only be $3,920 not the entire $11,760.

Just out of curiosity, what sort of repairs are you doing that will cost $27K? Sounds like a near-gut.


MCD, thanks for the transfer tax info.
I wasn’t sure where to get the numbers on that.

kdhastedt, I get it now. 14% of loan / 12 x no. of months.
I work with web code all day long but numbers still
seem to baffle me. ::slight_smile:

Also, I did this figgerin’ at 6:00am this morning - before my 2 cups of coffee.
Not a smart move. :stuck_out_tongue: I found a mistake with my out-of-pocket calculation too.

The $27k was derived from my estimate of $18k in repairs plus 50%,
like someone else on this forum suggested should be done to avoid under estimating.

So here are my revised figures.

  $120,000  (After Repair Value)
  • $  84,000  (Loan amount)
  • $    5,880  (14% interest for 6 mo.)
  • $    3,080  (Out-of-pocket repair costs)
  • $    3,800  (Carrying costs)
  • $       590  (1% transfer tax)
  • $    7,200  (Realtor's fees)

= $ 15,450 (my paycheck)

Unfortunately, this looks like one to pass on.
My repair estimate was based on my own inspection.
I found more info on this HUD home that says,
there’s mold, termite damage to the floor joists, backyard drainage
problems, foundation damage, concrete rear steps need to be replaced,
as well as all the windows. These are all things I didn’t figure on.
Gotta start looking for another “Good Deal”


I think your whole problem is in going the HML route. How much total available credit do you have? Remember all those business that were started on a credit card? I still get offers in the mail for very low intest rates for cash advances that are good for 6 months and sometimes until the loan is paid off. You could use that route for the repairs.

With that kind of fico score, you should be able to get a decent rate for investment property. Maybe at 90% LTV, you could do two 3k cash advances from a credit card to get your 10% down payment. Some banks may require seasoning so if you’re sure of doing these types of deals, it would be good to have that money in your account for a few months. Don’t take out more than 30% of your total credit on a card as that would lower your fico score. Make sure the loan doesn’t have any prepayment penalty and of course don’t pay any points.

You may also want to think about moving into this house and selling your old one. Then you’re owner occupied and you can get low to mid 6’s for interest rates all day. But first buy this type of property, then work on that other part about moving later…

This method would fix a lot of your carrying cost problems as those high interest rates really eat into your profits. Usually it’s the renovations that do it.

Anyway, just something to keep in mind for the next deal.