BiggerPockets

I'm interested to hear others talk about where they like to land their numbers for fix and flip projects. Some guys will only look at the deal if it has $50k of room after fix up, some guys are happy making $10-15k per deal and moving on.

What are your magic numbers? 1/2 of ARV? ARV minus 25% minus fixup? ?

For example, another partner of mine wont touch a deal if it dosnt have $30k profit (ARV - fixup/closing costs/realtor fees/holding costs/purchase = $30k to him). I'm in the $20k minimum camp, 10-15k is cutting it close incase something goes wrong...

We start the calculation with ARV minus 25% minus fixup = purchase price. Then break it down further, ARV minus fixup/closing costs/realtor fees/holding costs/purchase = potential profit. Hasnt failed yet with the 7 we have finished this year.

How about you?

Originally posted by Eddie Ziv

Anson,
you mixed two different thing. Dollars and percentage. You can work your formula and still end up with $10K-$15K profit if you're dealing with inexpensive properties. Also in the calculation is how do you value your own time. Some people don't mind to work on a project and earn less as long as they earn money but they forget to calculate their time in it.
I must admit that although I did and do rehabs, I don't flip. I only rent my properties out, but I am always fascinated by how people can really calculate ARV, especially in a fluctuated markets and the "mark to market" atmosphere we are in.

Understood, we do the first calclulation (with %) just as a quick 'is this worth our time', then break it down with #s and more accurate repair numbers.

ARV is easy, I'm an agent and have been running accurate comps for years . We did about 450 BPOs last year for our bank clients (REO listings) and keep a very close eye on neighborhoods and trends.

Originally posted by Josh Green

anson, eddie brings up an excellent question.... how do you come up with ARV?

Josh, see above: ARV is easy, I'm an agent and have been running accurate comps for years . We did about 450 BPOs last year for our bank clients (REO listings) and keep a very close eye on neighborhoods and trends

Thinking about it, we probabaly did closer to 550 BPOs last year however. For those of you who arent agents, how do you determine ARV for your fixups?

Originally posted by Ivan K.

stupid question but.. whats BPO stand for?

Broker Price Opinion

My stupid question is what's ARV?

Originally posted by Ivan K.

stupid question but.. whats BPO stand for?

No stupid questions: BPO is a Broker Price Opinion, used by banks to determine the value on a property (usually REO), or private parties who are purchasing bulk REO to determine a quick value without getting a full appraisal. The methods are similar to appraisal, get 3-6 recent (3 months old) sold comparables and 3-6 recent active comparables, adjust the prices based on condition/location/features/etc and determine an AS IS price and a REPAIRED price. Most accurate valuation you can get without an appraisal. If you do a few hundred of these, you get a really good idea of values and trends.

Try going backwards

Estimated sales price
-
Cost to sell (I use 8%)
-
Repairs (contractor estimate)
-
Cost to purchase (I use 2%)
-
6 months interest (based on total out of pocket)
-
How much money you want to make (I use 25-30%)
=
Max offer price.

Always padding for safety.

"I buy desperate sales but I'm not desperate to buy."

My flip formula is here (I'd cut-and-paste, but it's long):

http://www.123flip.com/education/the-flip-formula

I like to lump all my fixed costs (closing costs, commissions, fees, holding costs, etc) into one number, and because I focus in the same price range and with the same types of houses on almost every deal, I know that my fixed costs throughout an entire project is about $16,500. After subtracting out the commissions that go to my wife (my agent) on both the buy and sell side, my fixed costs actually come in around $13,500.

Here is a breakdown:

http://www.123flip.com/education/calculating-fixed-costs

As for my magic profit number (on my typical deal), I won't do a deal unless I'm nearly certainly I'll make $15K, with $20K the target. Historically, I've averaged $27K on my flips.

Of course, when the market turns and we're doing higher-end homes, my magic number will increase (15% of ARV is my goal).

Originally posted by Jesse R

Everyone seems to be happy with a profit of 20-30k.
Is this per project or investor/partner on the project?
How much time do you guys average per flip?(From rehab to closing table)

I can only speak for myself...

The $20-30K per project is doing it without a partner, focusing on homes in the $100K range (purchasing between $30-70K and selling between $100-140K).

The average flip for me takes about 100 days from purchase closing to sales closing. Rehab averages about 35 days, getting a contract averages about 32 days, and then getting to closing averages about 28 days. (you can add in another 30 days or so to get from offer to purchase closing)

At any given time, I have 1-2 in the purchase pipeline, 1-2 in rehab, 1-2 listed for sale, and 1-2 waiting to close.

Originally posted by Jesse R

Do you sell these homes at retail value? You must be selling at a discount to get buyers within 30 days.

We sell at around market price (whatever that is these days)...

We do full rehabs, with everything new (even if low end), including all appliances, washer/dryer, window treatments, new flooring, all new fixtures, etc.

So, basically, our buyers are getting a fully renovated house that's completely move-in ready, which is very appealing to first-time buyers.

Additionally, we fully stage our houses, which I believe is the reason why they tend to move pretty quickly. Our competition doesn't stage, and most typical buyers aren't very conceptual when it comes to looking at an unfurnished space.