I have finally found a realitor who will truly help me get started in REI and I think I will buy forclosed properties rehab and flip. The financing will come from a family member so I will have no mortgage or loan origination fee or anything like that…I’m not even going to pay intrest my dad will supply the money, my agent will give me a list houses (that meet my pre-set requirments) on every monday and update it throughout the week, i’ll research the deal and if it fits I will then pay cash and have it rehabed buy a contractor(contractor aggreement $1,000 bonus if work completed 7 days ahead of schedual) once the house is done I’ll list it for sell, using my agent…I have worked some numbers to get an idea of what to expect but not to sure if its right (would like to profit 25% of AVR) My main goal is to buy fix and have the property sold in no more than 60 days…looking forward to breaking the ICE of REI thanks for the replys here is my Break Down of Cost
ARV (low end) $ 100,000
Rehab Costs $ 10,000
Loan APR 0.00 %
Points for Loan Origination Fees 0.00 %
Number of Months Held 2
Desired Profit $ 50,000
Tax Appraised Value $ 100,000
Max Purchase Price $ 31,662
Will pay less than Max Purchase Price
Purchase Price $ 31,662
Repair Costs $ 10,000
Loan Interest $ -
Loan Origination $ -
Purchase Closing Costs $ 1,583
Holding Costs - Property Taxes $ 326
Holding Costs - Utilities $ 300
Holding Costs - Insurance $ 129
Sales Commission $ 6,000
Total Cost of Project $ 50,000
did I leave anything out?*
This looks a bit unrealistic. It is going to be hard to get a $100,000 house that only needs $10,000 in rehab for $31,662 and to make $50,000 on a $100,000 house if a dream at best. I am sure it may have been done by someone but it is not the norm. By the way it would be a 50% profit of the ARV.
A more realistic profit would be $20,000 to $25,000 or 20 to 25% of the ARV. In the above scenario this would give you a purchase price between $56,662 to $61,662. I did not change the commission or any of the other numbers which may change as they are just estimates at best any way.
Most flippers want to be at 70% of ARV with all the hard costs before they will do a deal or perhaps a little higher if it is in a fast selling area.
I hope this helps some.
Thanks Tedjr, yea I know it was at 50% but last thursday I meet a realitor here in town and he showed me 5 houses that were bought at 20k to 26k and sold for over 100k but of course we have no idea of what work was done…does the 70% ARV includse all expense and then sell for the profit…just want to make sure I understand before i buy my first deal…thanks again
Like I said earlier 70% usually includes all the hard costs. The cash to buy and the appraisal and HML fees if any and the fix up. Hard costs do not usually include the carrying costs, closing costs to sell including commission. and title policy and any of the buyers closing costs you may end up paying. This will come out of the sales proceeds and are not usually cash out of pocket expenses except the carrying costs. This is just a rule of thumb and in your case for instance you will not have any financing costs except the fact that you could have that money invested elsewhere (opportunity costs).