Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
7y
@Collin WIlkinson It's hard to give specific feedback on your deal since your post doesn't have many details.
You have two trends that may hurt your ARV:
That price band of the market has softened
If you buy now, you're selling in the winter, which is a weaker time in the market.
Now, those reasons won't kill the deal, but make sure you're realistic about your ARV. Many flippers are taking a haircut, especially now that market is seeing some increased inventory.
If you sell for $700k, subtract 6% for selling/closing costs (maybe lower if you get your buyer's agent to list for 1%) = $658,000 - 12,000 ($4,000/mo for carrying costs (x 3 months)) - $80k in repairs = $566,000 is what you net. Perhaps a 40 to 60k gross profit? Then subtract taxes.
It comes down to if those numbers are good with your risk tolerance and expected return.
Financing shouldn't be an issue, just work with a hard money lender. If it pencils out, you'll have no problem finding a hard money lender. Reach out to @Justin Cooper with Pine Financial. He's a good one.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
7y
What makes you think you can sell it for that much more? Is the property in poor shape? Often properties that are unique like this are difficult to value with comps so where did you come up with the $700k figure.
Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
7y
@Collin WIlkinson It's hard to give specific feedback on your deal since your post doesn't have many details.
You have two trends that may hurt your ARV:
That price band of the market has softened
If you buy now, you're selling in the winter, which is a weaker time in the market.
Now, those reasons won't kill the deal, but make sure you're realistic about your ARV. Many flippers are taking a haircut, especially now that market is seeing some increased inventory.
If you sell for $700k, subtract 6% for selling/closing costs (maybe lower if you get your buyer's agent to list for 1%) = $658,000 - 12,000 ($4,000/mo for carrying costs (x 3 months)) - $80k in repairs = $566,000 is what you net. Perhaps a 40 to 60k gross profit? Then subtract taxes.
It comes down to if those numbers are good with your risk tolerance and expected return.
Financing shouldn't be an issue, just work with a hard money lender. If it pencils out, you'll have no problem finding a hard money lender. Reach out to @Justin Cooper with Pine Financial. He's a good one.
Denver, CO · Member since 2018 · 10 posts · 1 vote
7y
@Chris Lopez thank you so much for the response. I was thinking about holding the property until spring time. I thought that might have an effect on the market and bring the buyers back at the start of the season.
Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes
7y
@Collin WIlkinson I'm a little more risk averse and would likely start with a smaller investment. With those types of numbers, if you miscalculate anything, it can put you out of the game from the very start. Especially if that price point softens, comps change, etc. I would start at a lower price point, get a few deals under your belt and then "graduate" to some of the bigger and higher cost properties. However, you didn't mention your income/financial resources and whether you could weather a storm, if it comes.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
7y
Short answer - Yes. The deal is way too slim by a long shot, especially for a first time investor. Your hard money costs will be substantially higher that what chris said. Plus you'll have insurance, property taxes, utilities, etc.
Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
7y
@Collin WIlkinson
If you were my brother I’d tell you to go at it with caution. That is a large house. You don’t want the largest house in the neighborhood. Depending on age of the home once you pull permits and start taking down walls or open things up you will have to bring things to code which can blow your rehab cost. If you have access to large amount of cash try buying a few rehabs and flip a few at a time if that risk doesn’t scare you. Just make sure you have good contractors who understand investors and are not charging retail especially if this is a higher end area. Contractors tend to bump up their price when they drive into a nicer area.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
7y
@Collin WIlkinson so I agree that it's too skinny for a first time person or even a seasoned person. You probably would want to start with 10% profit minimum (after all expenses, ie holding, resale and rehab). On a large deal, that's a lot of money but when you consider the risk it's actually not. Also I know of no hard money lenders that would finance your deal as you described unless you had a lot of cash ($200k-$300K) or equity in another property to leverage against.
I also concur with the caution about the largest house in the neighborhood and the softening of the market in that price point.