Minimum Spread for Flip
I have listened to every BP podcast and many of REI experts talk about the 65% (or slightly higher in some areas) of ARV formula for determining if a property can be a successful flip.
My question is if people would stray from that formula in more expensive markets. For example, I am looking at a REO in a hot market MA that can be acquired for $500K cash, that with repairs of $40K could be sold quickly for $625K and possibly closer to $650K. Since I don't have that kind of cash sitting around, I would need private or hard money loan to finance the purchase & rehab costs.
If I budget $25K in points/financing for 4 months, a 5% Realtor commission to sell the house and other incidental costs, my total expected costs would be around $600K, leaving $25-50,000 profit depending on final sale price.
So this is a long way of asking, is this expected profit margin enough to make the deal worth pursuing?
Thank you all in advance for your advice! Even if I don't pursue this particular property, I want to be better educated for the next time a similar opportunity comes along.