Will this be my first flip?

Question

ARV: 110k
Initial Purchase: 73k
Rehab costs: 10k
4.5%, 30 yr, 5% down Note
SFR, 3 bed/2.5 bath/1650sf, 2000 model

I am a Realtor and will collect 3% on front and back end.
Closing costs will be paid by seller in initial purchase.

I think that's enough info, in a hurry at the moment....I foresee about a 15k profit relatively easily....Am I missing anything?

Richard Warren · Answer

If you are looking to flip, the note isnâ€™t so crucial.

I wouldnâ€™t call this a slam-dunk deal.  If you apply a standard rehab formula to this deal it looks like this:

(ARV * 70%) â€“ repairs = Maximum Purchase Price

($110,000 x 70%) - $10,000 = MPP

$77,000 - $10,000 = $67,000

The fact that you collect commissions makes it an OK deal as long as nothing goes wrong.  If repairs are higher than your estimate it may not be so great.  Many rehabbers today look for a deal at 60-65% of ARV less repairs.

:cool:

Bill Gulley · Answer

Hi, Richard has a good point about looking for deals. I assumed you have a buyer.

Let's work it the other way,

Purchase price $73,000
5% estimated closing costs- $3,650.00
(should be around 1500)
Cmmission at 3% $2,190.00
 Acquisition Cost                    74,460.00
Rehab Costs Estimated          10,000.00
U Missed estimated by 50%      5,000.00
Total                                       89,460.00

Cost of carrying 3 months Est.  2,200.00
Closing Costs Seller                  1,400.00
Total costs carrying and sale    3,600.00

Sale Price          105,000.00
(U came down 5K)
Commission 3%     3,150.00
Gross Income    108,150.00

Cost                     93,060.00

Profit                    15,090.00

Bam! Go to the bank

We guessed at this, gave you 5K more for rehab, took 5K less on you sale and over estimated you closing costs, I'm sure and your original guestimate of 15K seems right on to me.

Sell it and let us know what happens!
Bill

Kyle Spiewak · Answer

Shawn,

Keep me posted on the deal.  I hope it goes through.

Shawn Culhane · Answer

Kyle, it fell through for me, but I am looking for other investors that are interested.  Currently my investor list is very small, none are interested in flips that are ready to make a move at this point it time.

It is now on the market for $69,900.....

Note that this property would rent between $1k and 1.1k as well.

Anyone interested??

Kyle Spiewak · Answer

I don't know if  I am missing something, but "3% commission on both ends". Does your broker get a cut of that?  If you are on a 50/50 split you might need to adjust your numbers.

Shawn Culhane · Answer

Just the thought of a 50/50 split makes me want to puke.  The split with my broker makes the difference negligible.

On a side note, my financing is falling through as I recently went full-time commission only.  My original partner is not wanting to carry the whole deal as he was just there for credit anyhow, but only for half and is not willing to do the whole thing......

I already have an executed contract and am unaware if they have taken any backup contracts.  I am trying to get a friend of mine to submit a backup contract for when and if mine does indeed fall through.  I am really uncertain how else to proceed....I am still certain this is a no-brainer (have had a contractor quote me $3200 for labor, priced out materials at $4000)....it will be VERY disappointing to not get a piece of this one......

Rico Muhammad · Answer

Those numbers DO NOT SAY DEAL! They say run the other way. But if you like it I love it. 110k ARV 10k rehab I get you receive 3% comm. on the buy side and 3 on the sell side but you should NOT touch this deal for over 67k.

Shawn Culhane · Answer

That's true, but I am sure the anxiety of going through all of this for a that size of a commission will really piss me off, haha.

Also, my offer was accepted today at 74k with sellers contribution toward closing costs at 4k.  I will update this thread as the flip progresses.  I have a couple options as to how to proceed from here.  My biggest concern is the FHA seasoning period, but oh well.....I expect a good profit.

Eddie Ziv · Answer

In this case, even if you sell it at cost, you still make money on commission ... seems like a win, win. :mrgreen:

Shawn Culhane · Answer

Good point Eddie.  In Texas however, it is legal for me to collect on commissions.

I realize I used ARV loosely....what I was using it as is what I believe I can sell it for within, say, 30 days of listing.

Two other offers (at least) went in on this property today.  I am running the numbers to figure out my best and final offer for the property.  Thanks for all the input so far!

Will this be my first flip?

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