Help analyzing a fix & flip

5 Replies

Hello BP!

I'm looking to get into my first fix and flip deal but have no idea what kind of margins are considered worthy in my market. The property is in Jersey City, NJ. I'm very comfortable with this market as I've been investing here since 2014, so I know valuations of different neighborhoods and blocks fairly well.  

I've been presented with an opportunity for a quick fix and flip. Here are the numbers. Would love to get some input to see if I'm doing my estimation on timelines/costs/returns correctly or if I'm missing something:

3bed/2bath SFR with parking and big back yard on a quiet dead-end street in a C neighborhood.

Negotiated price:$250k

Rehab Costs with 10% contingency (financed):$44k

Total amount financed:$264.6k (90% LTC)

ARV:$350k (conservative, priced to sell)

Timeline estimate (with lots of cushion, I think): 6-8 wks for rehab and another 8-12 wks to sell. I'm confident the property will sell within 2 months at this price but accounting for possible issues like buyer not being able to get financing, etc. 

Purchase costs (figured about 5% of the purchase and rehab cost):$15k

Holding costs (5 months): $8.8k

Selling costs (about 6% of the sale price): $21k

Invested cash: $44.4k

Total profit:$11.1k

Post-tax (figured about 25%):$8.4k (clean profit)

ROI: 21%

Thank you in advance. 

Farrukh

Originally posted by @Edward Verdel :

@Farrukh Madaminov sounds solid. What part of JC?

This is "solid"? You guys move around $300k to *hopefully* make $11k? This sounds light relative to the returns most folks on the website often say they are looking for. I personally wouldn't move around that much money for double the $11k.

You did seem to pad some of the estimates. 8-12 weeks to sell sounds too high. Why wouldn't a property priced to sell take half that time?

Originally posted by @Eddie Egelston :
Originally posted by @Edward Verdel:

@Farrukh Madaminov sounds solid. What part of JC?

This is "solid"? You guys move around $300k to *hopefully* make $11k? This sounds light relative to the returns most folks on the website often say they are looking for. I personally wouldn't move around that much money for double the $11k.

You did seem to pad some of the estimates. 8-12 weeks to sell sounds too high. Why wouldn't a property priced to sell take half that time?

Thank you for your input. It does seem light to me too given the amount of investment required, but based on my research on the fix&flip returns in our area, which is very competitive and expensive, 20-26% returns seem to be the norm. That’s why I took it here to get a second opinion, hopefully from the people who have experience with this type of deals around NYC markets. 

To answer your question, I'm confident the property will sell in less then 2 months at this price but, again, I have no experience in this so I’m going conservative on my numbers and estimates, accounting for possible issues like buyer not being able to get financing, or I don’t know what else could break the deal for the seller. Or am I being too conservative?