I am looking into my first flip. The purchase price is 107,500 it needs 35k for rehab, holding costs, realtor fees etc. The comps indicate an ARV of 180k-190k should I go for it?
@Phillip Trenk I added some numbers just to help with your analysis, however they are conservative. I added another 10k onto rehab costs, bringing the total to 45k. How much are you considering exactly for holding costs? I say in our area of NJ (I am from Toms River) it would be at least $1300 a month after all is said and done. I would predict to hold the property 4-6 months(again this is conservative). So lets say you put $157,500 into the project (Purchase price plus another 50k for all rehab and closing costs up until day you sell) and sell the property for 180k, the bottom of your range. You would make about $21,375 after about 5% of the selling price going to closing costs. So it is not a terrible deal if everything goes according to plan. Sorry for the long analysis, if anyone sees major flaws in it let me know!
Thanks for the input. I calculated 35k to include holding costs, the property doesn't "need" any work but some work would help it sell faster.
It depends whether or not you are trying to hit a margin. Based on those numbers I personally would pass, but it really depends what you want to get out of it. Based on my numbers you would want to get it for around 97k. Have you already submitted an offer?
Also that was assuming your ARV and rehab/cost estimate was correct.
Thanks again, I dropped this one because it just wouldn't hit the numbers. I don't feel comfortable with the margin of error.
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