Help analyzing my first flip

13 Replies

So I've managed to find a financial partner that is funding 100% of the deal and 100% of the rehab. I found a shell SFR that I can get for 100k and it will need an additional 100k on the high end to be completed. I pulled comps at 280 for a similar property, but I think I should be able to sell for 290 in this market should it continue for the next 6 months.

Any additional info can be provided, I didn’t want to load this post with numbers and info. Is anyone able to help me analyze this deal or give me their opinion?

Originally posted by @Brandon Ribeiro :

So I've managed to find a financial partner that is funding 100% of the deal and 100% of the rehab. I found a shell SFR that I can get for 100k and it will need an additional 100k on the high end to be completed. I pulled comps at 280 for a similar property, but I think I should be able to sell for 290 in this market should it continue for the next 6 months.

Any additional info can be provided, I didn’t want to load this post with numbers and info. Is anyone able to help me analyze this deal or give me their opinion?

- It meets the 70% ARV rule, so your off to a good start.

- Though doing full guts can get costly and take a lot of time! If you are experienced in this then I'd say use your own judgment, however if this is your first deal, Id say look for a cosmetic flip.

- A lot can go wrong when your replacing electric, plumbing, drywall, HVAC, framing.

@Steven Wilson thank you for your advice. I did forget to mention the house is completely gutted and they started re-framing. According to the agent, they were supposed to be finished with this flip but then covid hit and really messed them up with the contractors not being able to work and such.

So the house is gutted, all new subfloors and its about 90% framed. I liked it because that way there is no surprises with taking down drywall and finding a nightmare, there literally is not a single sheet of drywall in the house

Originally posted by @Brandon Ribeiro :

@Steven Wilson thank you for your advice. I did forget to mention the house is completely gutted and they started re-framing. According to the agent, they were supposed to be finished with this flip but then covid hit and really messed them up with the contractors not being able to work and such.

So the house is gutted, all new subfloors and its about 90% framed. I liked it because that way there is no surprises with taking down drywall and finding a nightmare, there literally is not a single sheet of drywall in the house

Thats a plus. Demo work is the worst!

Do you have experience with flips? 

Originally posted by @Brandon Ribeiro :

@Steven Wilson this would be my first one. I have construction experience and would be using my friends construction company which I trust

 Construction experience is great! But if this is your first one I'd find a partner who has flip experience, or be willing to make $0. It'll be a good learning experience regardless.

However have a plan B incase the market goes south, will it rent, can you refinance?

@Steven Wilson well its a flip, so we'd be rehabbing and selling it. Since I'm a real estate agent I would be making commission on the buying of the property, and again on the selling side. I would be the one to list it

Originally posted by @Brandon Ribeiro :

@Steven Wilson well its a flip, so we’d be rehabbing and selling it. Since I’m a real estate agent I would be making commission on the buying of the property, and again on the selling side. I would be the one to list it

Thats good. Just want to protect yourself from loosing money. If rehab is planned at 100k but is actually 150k you just reduced your profit.

Id run worse case scenario. If it still works, then Id move forward with it! 

@Steven Wilson hey, for my first flip I'm ok with taking the bad end of the stick. I ultimately want to keep my financial partner happy, because id like to continue working with him, and eventually just use him as a lender once I gain his trust. Worst case scenario I still walk away with my commission! But id be ok with that as an absolute worst case scenario because its a learning experience

Hi Brandon, one thing you might want to consider is doing sensitivity analysis on your underwriting. It's basically running your numbers over a few standard deviations of key areas to get a better sense for the risk profile. Doing this responsibly and showing it to your financial partner can also increase his confidence in you and the project. 

How many bed/bath? What is the ft2? septic and well or both city? Add up all you holding costs for at least 6 months. Interest, taxes, 4% cost to sell the house (instead of 7% bc you will list), insurance, gas, electric, plus at least a 10K oops on rehab estimate