Is making a small profit truly a bad thing?

Question

Pat L. · Answer

My old Jewish Attorney once told me

"you'll NEVER lose money taking a small profit"

but nowadays because of the unforeseen & inevitable contingencies I won't do it for less than 18-28% !!!

Jonathan R McLaughlin · Answer

Depends how much you are risking...

Ryan Murdock · Answer

@Marcus Turner Just make sure you are confident in your projected costs. It's not uncommon for 20% overruns if you aren't careful. Same with ARV. Are you sure you can sell it for what you think you can sell it for? If your projected profit margin is slim it doesn't leave a whole lot of room for error.

Andrew Johnson · Answer

@Marcus Turner You're asking the wrong question, your question should be:

Is PROJECTING to make a small profit a bad thing?

The key word...is...well...projecting.   The answer to "how bad" likely sits with your level of experience.  If this is Flip #58 then you probably know your materials cost, ARV, have your contingency budget, know closing costs, selling costs, have a go-to realtor, reliable contractors, etc.  You probably even can eat a flip that goes sideways and isn't profitable.

If this is Flip #1 then projecting a small profit is a boatload o' risk.  Now if you're a realtor (your profile doesn't say) and you know you'll make money selling so you can "double dip" on the profit side, it might be a different story.

Carson Wilcox · Answer

like was said above... if your numbers are clean, making 15 grand is 15 grand.

BUT 15k can get nailed pretty quick at rehab or at sale with a price drop.

Jonathan R McLaughlin · Answer

@Matthew Paul  Well, if you risked 1M to make 1 dollar I submit that would be too much risk of for the amount of potential gain. If you risked 10cents to make one dollar I'd do it in a second....

Agreed with the spirit, though, and 15K-20K is nothing to sneeze at in my book.

Alex Huang · Answer

To echo what others have said, the important thing is that your numbers are sound.

There is no reason to chase specific %s. We all have our own goals in this journey. Just understand the pros and cons of things. Smaller profit margins require less work (pro) but are more risky if you overlook something (con). Larger profit margins require more work (con) but leave you with a lot more wiggle room with the unforeseen (pro).

Matthew Paul · Answer

Making 1 dollar beats losing one .

Is making a small profit truly a bad thing?

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