Is making a small profit truly a bad thing?

14 Replies

I have a deal that fell in my lap. After selling, I stand to make between 5% - 16% profit ($12k-$36k). Is that a terrible thing? The work involved is just a light freshening up cosmetically: paint, carpet, appliances, and granite.

As long as you're happy with what you made then go for it. How many hours worth of work will it take? What will you make an hour after everything is totaled up? If I can make $50 an hour or more doing anything, I jump at the chance. That's more then I make and after Uncle Sam gets ahold of my paycheck it's more like i'm working for $10 an hour (just kidding).

If your going to make it in this business, hitting singles and doubles are just as important as the home runs and grand slams. Go for it!!

@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.

@Marcus Turner , it’s not a bad thing if that is the best return you can get for your money. 

Just make sure that you are accounting for a realistic ARV andall the expenses. Not only the rehab costs need to be accounted for, but also holding costs (taxes, insurance, interest payments if using OPM, utilities, etc.), closing costs (agent commission, transfer taxes, seller incentives, etc.), and income taxes.

Worst case, hopefully you don’t lose money with a deal that is too thin, but learn a ton for the next one. Best case, you make a good chunk of cash! Definitively better than sitting on the sidelines. 

Making 1 dollar beats losing one .

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% !!!

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   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.

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.

@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.  

   

All/any profits are good. Profit is profit.

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