I’ve got my eye on this small property in a low-income area that is vacant and the seller is motivated. I try to structure my assignments based on my buyer. In this example, these numbers reflect a rehabber who will clean up the property more than a buy-n-holder who plans on renting it out. If this property needed to merely reflect the conditions of the surrounding houses for renting, I could reduce that repair estimate to $7000 or maybe a little less.
Here’s the details:
Listing Price: $79,000
$50,000 Purchase price of rehab (this is what I’ll offer)
$10,000 cost of repairs (paint, carpet, yard)
$3,000 My assignment fee
$2,328 14% of loan/12 x 3 # of mos held
$3,000 5% Point(s) for loan origination fee
$500 Other purchase fees=appraisal, title cost, termite report, comps,etc
$850 Holding cost= # mos x (taxes, insurance, utilities, etc.)
$500 Hedge factor
$4,250 Sale fees, ads (increase % if using realtor!)
$74,428 Total cost of project
$85,000 ARV (After Repair Value) Low end
$7,500 20% goal
$10,573 Profit
I know the profit spread isn’t much, but it’s over the standard 20% profit margin required for it to be a “good deal” for a rehabber who plans on selling the house. Also, these numbers are based on a typical hard money loan, reflected in the points and higher interest rate. If a rehabber bought this with cash, then the equity spread could increase by another $6,000.
So, what do y’all think? Do any of you have rehabbers that do these “little deals” and like these types of numbers, or are they more about the amount of money and not a percentage profit?