BiggerPockets

Forgot to mention. I'd be asking to buy at 60k, 65k being my limit. 20% holding/closing in and out = 38k.

189-38-55-65k = roughly 31k in profit. Tight margins, now that I think about it. But, let me know!

Seems like a reasonable deal *IF* you are very confident with the numbers.

Is there any way you can decrease that $38K in fixed costs?

Glenn I am not a fix in flip person but this deal doesn't sound that great to me.

1.What are the saturation levels and inventory you will be competing with on the market and pricing?? What kinds of finishes is the competition using?? Example you are planning on formica in your repair estimate but a majority are using granite etc.

2.Is your area increasing,decreasing,or flat in pricing and by what percentage each month??

3.Being an older house you will run into many issues over a newer build.Have you taken into account cost overruns and longer times to rehab once unknown items are discovered?

Are you using hard money or paying cash?? If hard money a longer time line and delays will eat up potential profit with extra carrying costs.

4.Many of your comps are either old or far away 1.2 miles to 1.5 miles.Is the area you are looking in urban,suburban, or rural??

If urban to suburban over 1 mile is not an accurate comp.In fact when I do BPO's for banks and mills they want usually within 3 miles for rural and sometimes up to 5 mile radius or less.Suburban usually 1/2 mile or less but up to 1 mile in certain circumstances.In Urban core they want 1/4 mile or less.

The BPO companies and their clients feel even if a comp doesn't match up that's close they would rather have me make adjustments than go to far out of area where they believe the comps do not match to the subject.

So I would re-look closely at comps and try to find better ones that are closer.

Example if you can only find solds 1 mile away for 180,000 but no solds near you but actives for 150,000 then the 150,000 or less carries much more weight.The buyers are giving with the data that they will choose to pay more for a similar property in a nicer area and pass over the actives where you are willing to purchase.

Thanks for the replies guys! I'll try to answer all the questions.

@Terry: No I havent rehabbed a home from the 50's, let alone one this size. I've budgeted some money for extra HVAC expenditures (5k committed, 3k overruns), unexpected framing, etc. that an inspector might see. But with my last house we had drywall up before any inspector could see anything. I plan to do the same here.

@J Scott: I'm being very conservative with the holding cost. Im halfway finished with an online real estate agent course, I might be the listing agent on this property. I seriously think I won't get above 30k in holding costs. We're paying a lot in cash so that should lower holding costs also.

@Scott: I will research the sunroom more. I also need to investigate the permits to see if the current sunroom structure was permitted. If not I may tear it down and just make a deck.

Regarding the flooring, I'm budgeting for new subfloors. Some areas might need just patching/leveling and then hardwood laminate right on top.

Regarding the downstairs master, Im convinced it would be a great space and would outright sell the house. If staged correctly I could split the master into both a sleeping space and fairly large sitting/office area. That might help offset the smaller living room. The kitchen would be opened up and free flowing with the dining room and living room. A finished sunroom will add that much needed extra living space if possible. A big deck, however, would solve the entertaining space problem that you speak of. Nice french doors to the deck help tie that space together.

Mold check looks good so far. There are no walls for the most part remember, lol :)

As for the plumbing, The space where I want to put the en suite is the converted 1 car garage. This means direct access to the crawl space. I'm thinking about framing the en suite sub floor one step higher than the master suite. This will allow us to run plumbing easily as well as add a sunk in feeling for the master bedroom.

As for changing the layout, I try to cater to the female taste (they are, after all, the ones who pick the house!). A luxurious kitchen and master bedroom w/ ensuite will set me apart from all the competition.

@Joel: As with a lot of markets nowadays, there is quite a lot of saturation. My realtor and I, however, are convinced that nicely rehabbed houses are selling fast. This house is in a very desirable neighborhood. This neighborhood has maybe half a dozen comparable comps sitting anywhere from 175k - 230k sitting on the market now. None are rehabbed and none have the finishes I plan to put into this house (granite, nickel, etc.)

I have budgeted for cost overruns and longer rehab times. I made the mistake of not budgeting enough for overruns on my first flip. I will not do that again if I can help it. This flip will be about 45k in cash...

203k loans are only for owner-occupants I believe. At least that's what the HUD website says. Do you plan to spend a year living in the house?

I would agree that you should be able to keep your soft costs around or below 30k unless you are using expensive hard money or something. If you are using cash I don't see how you could go above 30k.

Do you think the location will be an issue? Looks like the lot backs to commercial property that is adjacent to a major road. It's also close to the highway although I can't tell if that would be an issue. If it was south of that cloverleaf I would say go for it. However, that's just me looking at an aerial map and the recent solds on Zillow.

I could speculate on the repairs and comps as well but if you are confident on both of them I think your plan of getting it at 60-65k is a solid plan.

Quick what if: 55k rehab, 65k purchase, 30k soft costs, sell at 185 = 35k profit on about 126k investment (purchase, buying/holding costs and rehab) = 27% ROI.

That handbook was written in 1991 and on the HUD 203k FAQ page it says there was a moratorium placed on investor participation in 1996.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/faqs203k

Back to the drawing board... I was overbid on this one. Other than the "I buy houses cash" campaigns, how else do you seasoned rehabbers find deals. My realtor and I search MLS everyday for new deals. Zillow and trulia are often a day or two late...

Also, anyone even flipping at this time of year?