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Rehabbing & House Flipping

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Kayla Scordo
  • Clifton, NJ
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Flip or flop? Advice needed ..

Kayla Scordo
  • Clifton, NJ
Posted Jul 2 2021, 09:41

Hello BP Community,

My boyfriend and I are considering a flip and would like to get feedback from this amazing community.

Our backstory: we are interested in flipping so we can build up our capital reserves and then move into rental properties. My boyfriend is extremely handy in all aspects of construction, is a structural engineer by trade, and owns a construction company in the steel sector (infrastructure based). We bought our personal property a few years ago and gutted and renovated ourselves. A production company for HGTV has shown some interest in us however, nothing is concrete.

We recently found an off market property we would like to flip. It is located in a nearby, desirable town. It needs quite a bit of work and the seller will only take cash (not open to seller financing, unfortunately).

The numbers:

Purchase price: 322k

ARV: 540-560k

Repair costs: 100k

Holding costs: 1k/month (conservatively estimating a 6 month timeframe)

Realtor fees: 33k

Closing costs for both transactions: 10k

Hard money lender would charge 10% interest, 2 points, will put 80% of purchase price down. We would be responsible for 20% of purchase price and fronting the rehab costs in the beginning of the month until they reimburse at the end of each month.

We still need to call other hard money lenders/ try to find private investors to see if there are better financing options out there but conservatively, based on this loan, we are projecting around 40k profit before capital gains taxes when all is said and done.

Would you do this deal? Is it worth all the work for that kind of profit before the government takes their share? We see some signs of the market slowing down/changing where we live (NJ) and this concerns us. We would be doing as much of the work ourselves to keep costs down but is it worth trying to balance two very demanding endeavors (construction company and flipping) for that profit? For the experienced flippers - what does your minimum profit margin look like?

Thank you so much in advance for any feedback, insight, or guidance you can offer.

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