BiggerPockets

Been reading a bunch on here lately and wanted to see if I am running the calculations correctly for a hypothetical flip.

Cash Outlay: $50,340

Purchase price: $160,000 (10% FannieMae Homepage Renovation Loan)
Rehab: $15,000
Buying costs: $6,600 (is this way too high?)
Selling costs: $8,600
Holding costs: $4,140
ARV (sales price): $220,000

Profit: $25,660

1) Assuming my estimates are correctly am I calculating things correctly?
2) Would any of the pros out there pursue this flip or are the margins too small?

Thanks

Not enough details.

What is involved in the rehab?
What is the rate for your financing?
What is the timeframe for rehab and sell?
Some of your holding costs will be more than just funding; things like utilities, insurance (for builder's risk or vacant property can get quite expensive), property taxes, lawn care / landscape maintenance, HOA fees, etc. So you'll need to get some decent numbers for some of these extra expenses too.

Buying costs certainly see high, but, I'm even concerned about the selling costs. Are these your estimated closing costs? Are you planning to sell on the open market or have you an investor buyer interest? Also, watch out for the deed restrictions from the seller that may prohibit you from selling the property with 90 days for a profit, even with proof of rehab and appraisals the deed restriction may hinder if you are looking for a quicker resale.

On my REO there is a stipulation that I cannot resell the unit above a certain price for 90 days. In addition, when you look at the insurance for carrying costs, the builders insurance (from what I have seen) is even more expensive than traditional insurance and my policy was a 6 month minimum. Just a couple of thoughts to throw in as you estimate holding costs and duration.

Thanks for all the replies. The rates is 4.25% with 2.5 points. I learned today that you can't use the Fannie Mae renovation loan for a flip but you can use their regular homepath loan that is available to investors. It requires 15% down and the rate and points are as stated above.

I will have to look further into the insurance carrying costs and selling costs. No Hoa's no lawn maintenance. Easy flip really just carpet, paint, some work in kitchen and a little landscaping in the backyard. And yes the deed restrictions do apply I have to hold for 90 days. I took a look at all this info and the deal looks like a no go.

On to find the next one. Thanks for the help guys.

Something else to consider is that "easy flips" may not be the best choice. If you do just a small amount of work an appraiser may have a tough time justifying a significantly higher price when you go to sell.