New to Real Estate · Philadelphia · Member since 2024 · 16 posts · 8 votes
Hi Everyone,
I am new in real estate, purchasing my very first investment property. My partner and I are under contract to buy a SFH in Fishtown, Pennsylvania. The house is build in 1875. The inspection showed more issues than what we anticipated. I am guessing this is common for the age of the house.
We are negotiating to get it under 200K, and invest 65-70K. Based on our calculations for repair, carrying cost, closing cost, the all in cost will be 283K. Once we sale, based on other comp in the area, our net profit will be around 30K. My question to you guys is...would you go through a flip for 30K or less before taxes.
I would only do it if you were okay holding on to the asset for the long term. $30k can turn into $8k or 0 really fast - whether that is due to unexpected costs - especially on an 1875 vintage home - or your ARV estimate being off. I'd be okay taking a swing for a $30k profit if it's a good buy and hold property. Otherwise, I'd pass.
@Uendy Garcia the last time foreclosure properties made sense was as profits were coming down because of overbidding the pros came down to accepting an 18% profit on the total purchase price and invested capital excluding personal time value. You are at around 11% projected profit a very slim profit and no room for error. Unless you love this property and if worse came to worse and you had to keep it would you be ok? Maybe a keeper and a sale another day.
Hi Jeff,
At first, we loved the house due to its location. However, I came to the realization that if this is a business, we should not develop any attachment. Since we are not financing this deal, we can not keep it as a long/short term rental. Our plan is to fix and flip to move on to the next project, thanks for your input.
Keep emotions out of it, Its business. This is NOT a deal you should do. get it for 40k less then do it ,
Good luck
I am learning to treat this deal, which is my first as a business, not emotions attached, thanks
@Uendy Garcia certainly better than paying a guru. Learning by doing is the best way. Have and have had 100+ year old properties which can be a lot of fun and a challenge too. Best of luck.
@Uendy Garcia the last time foreclosure properties made sense was as profits were coming down because of overbidding the pros came down to accepting an 18% profit on the total purchase price and invested capital excluding personal time value. You are at around 11% projected profit a very slim profit and no room for error. Unless you love this property and if worse came to worse and you had to keep it would you be ok? Maybe a keeper and a sale another day.
Hi Jeff,
At first, we loved the house due to its location. However, I came to the realization that if this is a business, we should not develop any attachment. Since we are not financing this deal, we can not keep it as a long/short term rental. Our plan is to fix and flip to move on to the next project, thanks for your input.
Keep emotions out of it, Its business. This is NOT a deal you should do. get it for 40k less then do it ,
Good luck
I am learning to treat this deal, which is my first as a business, not emotions attached, thanks
Do not do the deal one mistake and it’s a complete waste of time.
@Uendy Garcia Keep in mind the $30k will be taxed - state, federal and FICA. Depending on your state and federal bracket you could be paying 30-50% or more in taxes. That really brings your net income in the deal down.