What profit do you make?

Question

For anyone willing to share, what do you typically profit (after all fees, not including capital gains) make on a single family home rehab with an ARV of say 200k? What is typical and what is the minimum you'll accept? Better yet, what were those (expected) numbers on your first few deals?

! know to pay "about" 70% ARV but really just as long as the numbers work but I'm really to hear about the bottom line you expect.

Thanks!

! know to pay "about" 70% ARV but really just as long as the numbers work but I'm really to hear about the bottom line you expect.

Thanks!

Amy Vasquez · Answer

Thanks so much for your reply, it really helps!  So wow, 70% is your max huh.  I do seem to see others posting all the time about 65% and sometimes even 50.  I;m going to write down your quote "you'll never lose money on a deal you walk away from"  That's a great point to keep in mind when you're wanting to MAKE those #s work.  Thanks!

Lynn Z · Answer

I sold five houses between June and October this year by FSBO.  If you have a product that is remodeled to the 9's and are willing to have a good series of open houses...you can sell your own houses.  You must put out signs, have attractive color flyers with good information and be willing to answer the telephone and show your house at the drop of a pin.  You must be open with everyone and answer every question...even the stupid ones.  Don't be sensitive.  Keep those tubes filled outside of the house daily.  People resent finding an empty tube.   Have several examples of a contract.   A buyer will not (I repeat) have any idea where to go for a contract or how to get a copy of one to even amend...so help them get to the information as much as possible.

After you finish remodeling a house...no one knows more than you do about that house.  If you don't have a sales personality...get a friend to help you show your house.  I never have enough profit to pay 6% commission to realtors but I will always agree to pay any realtor 3% if they want to bring a customer through.  They never do want to make that split of 1.5% with their broker but I'm sorry.  They may wish one of these days that they courted FSBO's.

John M. · Answer

Reality,

How often do you come across serious fixes that were unforeseen? Are they usually electrical/plumbing for you? How much on average do these serious fixes cost?

Thanks!!

Jenny F. · Answer

the property that i am working on now i bought at 28% ARV based on quick sale price.  I paid 70k, have 45k going in it and expect to sell it quickly at 249,900.00 because it is in the private beach area which is very coveted over here.  Even if i were in a position to have to sell it at say 199k, that is still only 57% ARV.......FIXED...If i sit on this property for 2 years it will probably be worth 300k (but i cant sit on it due to lending restraints)...If i had to sit on it, the house sleeps 10 so in the summer months i could easily get 2000 per week renting it out to vacationers from May to September which would net me 40k per year...

So including rehab my total ARV is 46%.  If I sell it FSBO and send faxes to all the realtors in my area and offer them a decent percentage (5-6%) to the buyer's agent, i should have a good offer on it within 30 days. We also market them by telling the neighbors to tell their friends and we give them a nice kick back if we close their buyer...

The last one i did ended up being in total 71% ARV because of serious unforseens (electrical issues and plumbing issues)  From that i learned to just always account for that in each budget because im a freak about electrical problems....

The one before that 64% ARV FIXED....the one before that 35% ARV fixed....

They are out there you have to keep your eye on all of the properties or have an excellent bird dog to find them for you.  The one im doing now i stalked for over 3 months and bought it before it even got onto the MLS.

that said, to answer your question there is no "typical" profit for me anyway.  It varies with each property....You really want to strive to buy as low as you can....

Jim Croto · Answer

True, much depends on your investment philosophy.  Excuse a newbie to this site, but I live in one of those states (New Mexico) and if the goal is to rehab, refi, and obtain cashflow until the market changes, then this state can be a place to do that well.

In Abundance,
Jim

N/A N/A · Answer

your skilling in fixing is time and cost of saving labor

high cost states such as calfornia, new york and hawaii. 
labor cost is too expensive unless you can do the work yourself.

however, states such as texas, new mexico
labor are cheaper and but the risk is if you can able to move the property
(able to sell it)

test your market first.... slow moving states i would stay out unless you have a buyer...it make sit for months or years.

thanks
sunsmicro

Jim Watkins · Answer

I can't say what does and doesn't work in other US markets but I do know that selling FSBO in the Dallas/ Ft. Worth area is a futile move.

Granted, a good percentage of people do it FSBO because they simply don't have sufficient equity in the property to cover the 6% Realtor fee's but, as I teach/preach in my classes... Compare extended holding costs to what Realtor fee's would be.

Here is a decent example:

[b]$1,000 per month holding costs for a property of 100K value.

*With Realtor:
Rehab time (1-2 months), Listed time on MLS (1-2 months+), Contract, Option and Pending time (3-4 weeks). Up until the closing of the sale. And that's IF a contract doesn't Fail!
$4,000 total holding costs - 4 Month

*Without Realtor:
Rehab time (1-2 months), FSBO advertising time (1-4,5,6 ++ months), Contract, Option & Pending time (3-6 weeks w/o Realtor guidance) and GOD HELP YOU IF A CONTRACT FAILS!!!
$4,000 up to but not limited to $12,000 +

Bottom line: Use a Realtor and pay them up to if not more than the regular fee. It motivates BOTH Realtors (listing & buying) and cuts holding times (listed time) into the single and low double digit times. 
All that does is SAVE MONEY on the holding costs!

Hope it helps.

Jim Watkins[/b]

Ryan Webber · Answer

ARV is After Repaired Value.  It is what the house will sell for all fixed up.

Jim Gordon · Answer

Lets be old school-- in my market a do it yourselfer is the only one trying to sell the property. List with an agent you get 6000 trying to sell it.

N/A N/A · Answer

What is ARV?

Thanks