Buy and Flipping a property

9 Replies

Is a buy at $115,000 (20% down payment of $23,000), repair cost of $20,000 and sell at $175,000 a good deal?

It depends on what it costs you to hold the property. If you can get in and out in a mo th or two, the numbers are good. If it takes you a year to fix and sell, not as good of a deal

@Marco John

Generally you try and strive for 15% of ARV (after repair value). So $175k x .15 = $26k (minimal profit expectation).
Your cost of $115k + $20k = $135k total cost.
$175k sale price - 8% (commissions/prorations/fees) = $161k - $135k cost = $26k aka 15% of ARV. It’s a winner in my books assuming all costs / numbers are relevant.

Originally posted by @Nik S. :

Marco John

Generally you try and strive for 15% of ARV (after repair value). So $175k x .15 = $26k (minimal profit expectation).
Your cost of $115k + $20k = $135k total cost.
$175k sale price - 8% (commissions/prorations/fees) = $161k - $135k cost = $26k aka 15% of ARV. It’s a winner in my books assuming all costs / numbers are relevant.

  nik this will be my first property. Thanks for the insight. Any extras tips are welcome.

If you can be in and out in a few months, $20+k is a good profit. Just remember that you have buying, holding and selling costs to budget into your numbers.

Nick S said it great. One thing to double check and firm up are the repair costs and ARV. Being your first flip with tight margins you really should make sure those are good numbers. Doesn’t take much for both of those to move in the opposite direction and that $26k can shrink quick.

Also don’t forget about the tax implications too. Flips you pay ordinary income and self employment tax since it goes on your Schedule C. More to consider.

Good luck!!

@Marco John

Keep in mind, depending on your market 15% is minimum (for me) Average range is 10-20%+ however the higher returns are getting harder to obtain due to higher purchase prices / low inventory. As another BP member stated, watch your holding costs and you have to see how long it will take you. Call the utility dept (water gas etc) to see if any unpaid balances are owed on the property. Check your area comps. List goes on :-)

Nik S said it very well. Must double check repair costs and ARV. As you said, it's your first property, you would suppose to get great returns from this. It would be a great deal if you sell it out at $175,000.

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