BiggerPockets

My 1st rehab is complete and currently leased (cash flowing $650 per month, appraisal came in $12k over my estimated ARV, might sell next spring) and I am ready to start on deal #2.

BiggerPockets had a lot of great advice on my 1st flip. I made a lot of rookie mistakes, one of the greatest being that I wasted much idle time on the deal. I gave my general contractor too much slack and not enough incentive to finish the deal on time.

This time around I've got 2 deals I am submitting offers on. I will not be using a GC, I will not be buying via wholesaler, and I will not be spending any money out of pocket until its under contract.

Here are the details of my deals:

#1 - 3/2/2 - Built 1991, brick on 3 sides
ARV - $110,000 (verified by comps)
Purchase price - $61,500
Rehab est. $10,000
Time line for rehab: 2 weeks max
Rehab level: Minimal
Rehab description: Sheetrock repair, paint (interior only), carpet, new range hood, basic landscape, remove door inside
Total equity capture BEFORE SALE: $38,500
Less purchase cost: $3,517 (3.8% plus inspection fee & insurance)
Less holding cost: $4,500 ($1,500 PM fee, 3 months of holding)
Less selling cost: $3,300 (3% of ARV)
Total profit: $27,183

#2- 3/2/2 - Built 2006
ARV - $82,000 (verified by comps)
Purchase price - $42,650
Rehab est. $10,000
Time line for rehab - 2 weeks max
Rehab level: Minimal
Rehab description: Remove room addition for garage, add garage door opener / rails, install laminate wood floors living room, carpet 3 bedrooms, paint interior, basic landscape.
Total equity capture BEFORE SALE: $29,350
Less purchase cost: $2,800 (3.8% plus inspection fee & insurance)
Less holding cost: $4,500 ($1,500 PM fee, 3 months of holding)
Less selling cost: $2,460 (3% of ARV)
Total profit AFTER SALE: $19,590

I budgeted 3% for selling cost because I am a licensed agent. If they need a home warranty or closing cost assistance obviouslly those numbers will slightly adjust.

I am also paying a project manager to manage the rehabs of these deals. $1,000 per job, on site every day with status updates to me.

Your feedback / opinions are welcome as always...

Danny

Agreed with Steve that selling costs seem very low. On my deals (same price range), I generally end up paying:

- 3% selling commission
- 3.5% seller-paid closing costs (on average)
- $400 home warranty
- $375 appraisal fee (for FHA less than 90 day resale, you'll likely need to pay for one of the two appraisals)
- $50 termite letter

On $100K resale, I'll spend an average of $7500 on selling costs (and I'm a licensed agent as well, so I save the listing agent commissions also).

As for deal #1, you mention that it was built in 1991. I'm guessing it's never had a new roof or new HVAC installed, and given that they're 20 years old, they'll probably need to be replaced. If you don't replace, you run the risk of an inspector pointing it out and a buyer asking for it to be done. Likewise if the H2O heater is more than 8-10 years old.

You also don't mention replacing any light fixtures, plumbing fixtures or cabinets. In my experience, at about 20 years old, most houses either need these things replaced or the 20-year-old look of the fixtures/cabinets makes it desirable to replace.

Just some things to think about.

I generally budget 10%. The selling commission is going to be 3% (and I often add a $500 bonus), and in my area, the seller paid closing costs are generally going to be at least 3%, sometimes up to 6%. And with FHA buyers, you'll almost certainly need to pay for one of the appraisals (buyer is not allowed to pay for both per FHA rules).

So, I couldn't imagine the selling costs to be less than 6.5% on a typical deal (though things could be different in your area).

The 1st deal went under contract to an owner occupant buyer. I'm assuming they will close. I am going to keep an eye on it.

The 2nd deal got removed from HUDhomestore.com for no reason. It's still on the MLS and the listing agent does not know whats going on. She keeps telling me to look on HUDhomestore. Does HUD communicate to listing agents about whats going on?

On another note, I looked at a house today a wholesaler sent my way. I am passing on that one. Some good advice I read in another thread said try and talk your self out of every deal that comes your way. Too many negatives on the one I saw today.

I've got 7 more to look at this weekend. They have all been on the market now 90+ days.

Also, I am using a new hard money lender. We're getting rates at 9% with 2% origination, no up front fees.. closing in 7-10 days. Its better than my previous 14% lender with 4% origination.

I'll post more updates as they arise.

Danny