Getting cold feet... please help run my numbers

To give an example, just put a roof on a 1700sf house and it was 29 squares, and they wanted 15.2k for the job. Someone else will chime in they could have got it done for less than 10k. The materials alone were 7.5k. As I'm not a roofer, and have no crew of my own, my price is different than some pro who can get the work done cheap.

2 Reply

Kyle EbersoleBusiness Member

Real Estate Agent · Lancaster, PA · Member since 2022 · 78 posts · 75 votes

2y

I run my numbers between a $25-30k margin so seeing that you can get $50k plus is pretty good. Properties that have bee vacant for that long do concern me as there can be underlying issues that you can't see until you get going. But an inspection being done is helpful.

I would run a budget including replacing the windows & roof. That way you can see what a worst case rehab looks like. If you still feel good about your profit (still making $40,000), I would say that is pretty good.

In your holding costs, are you accounting for taxes? Utilities? Insurance? Transfer taxes? Origination fee on your loans? Do you have contingencies banked into your rehab number for if something goes south? For selling costs, do you have both agent fees and whatever Florida requires for a transfer tax (here in PA they require 1% from the buyer and seller)? If you have all your numbers, with contingencies and you can make $50,000, that is worth some headaches.

4 Reply

Steve W.

USA · Member since 2014 · 119 posts · 102 votes

2y

Quote from @Gabriella Borukhov:

Quote from @Taylor L.:

Can you be more specific with its location in Florida?

It's in the city limits of Sarasota.

I am local in Sarasota. I did a live-in fix and now rent it on AirBnB/VRBO. I'd be happy to chat about whatever if you'd like.

I had a horrendous time with contractors. Very expensive, don't show up on time, and do crappy work. I'd say the #1 most important next step is to get a contractor that you can trust, because you just really can't see the finer details through facetime/video/pictures.

4 Reply

Ward Dement

Sarasota, FL · Member since 2018 · 17 posts · 13 votes

2y

I've been in Sarasota over 30 years. It's easy to have a bad contractor experience, but there are very good ones too. Unfortunately, with the growth in our area over the last several years, they are completely booked. You might find your timeline too short to get the renovations finished and the house sold.

Sounds like you may have purchased right. But $575M to $600M ARV, no pool(?) sounds aggressive to me, even in our market. The plus is the 1,700 SF size. If it's a "true" 1,700, no garage conversion or patio enclosure, you might get close. Otherwise, you're moving internal concrete block walls and your renovation cost is way under to get a standard floor plan.

Happy to offer an additional "two cents" if desired.

4 Reply

Gabriella Borukhov

OP

New to Real Estate · Member since 2021 · 21 posts · 14 votes

2y

Quote from @Ward Dement:

I've been in Sarasota over 30 years. It's easy to have a bad contractor experience, but there are very good ones too. Unfortunately, with the growth in our area over the last several years, they are completely booked. You might find your timeline too short to get the renovations finished and the house sold.

Sounds like you may have purchased right. But $575M to $600M ARV, no pool(?) sounds aggressive to me, even in our market. The plus is the 1,700 SF size. If it's a "true" 1,700, no garage conversion or patio enclosure, you might get close. Otherwise, you're moving internal concrete block walls and your renovation cost is way under to get a standard floor plan.

Happy to offer an additional "two cents" if desired.

Yes, A huge reason of why I calculated that ARV is because it's in the city of Sarsasota. Right next to downtown and I feel like those properties are more expensive. Its also on a 14,000 sq ft lot. I would love to hear your additional "two cents". I will send you a message.

0 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

2y

1) yes it actually is a huge risk. Flipping is an activity towards the higher end of the risk spectrum

2) Yes you absolutely could lose money. Or you could make a ton of money

3) Yes you absolutely can have a bad experience.

But I say dont be afraid of losing money or having a bad experience. I lost money on my first 3 flips. Best education money could buy.

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3 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Gabriella Borukhov:

I finally decided to invest in a fix and flip. Everything was making sense until I had a bunch of people around me tell me it's a huge risk. Now I'm so scared because I don't want to lose money and have a bad experience. It is my first flip and it is quite a "bigger" flip but the numbers made sense to me and wanted to know what some of you experienced investors think.

Some details about the property. It is about 1900 sq ft. It is located In Florida. Owner died and house has been vacant ever since. There was a probate. I did get a inspection done. Roof was done 10 years ago but there were some leaks identified so inspector recommended that I change the roof. It's on a block lot, no foundation issues were identified. HVAC is updated. Plumbing looks good as well. (Water ran for about 6 minutes). Electricity is good as well. Only issues that we have identified that we need to fix are cosmetics. Completely renovate the kitchen, 2 small size bathrooms, floors all over, "freshen up the windows" (windows were pretty old but contractor said we might not need to change them), cut off tree branches on top of the roof, add a walkway in the front. There was some termite damage on the fascia as well. Also, rodent droppings were detected.

Home price is $369,000

Rehab given is $80,000

Down payment is $44,900

Loan amount that I will owe back is $404,100

Loan is for 6 months

Holding cost for full 6 months is ($3500*6) = 21,000

Closing cost = 19,553

ARV = 575000 (my agent said $600,000 but I am doing 575,000 to be conservation, with the way the market is going I do question if I should estimate it lower)

With my math, using the full rehab loan and full 6 months with selling costs included, I estimate around a $53,000 profit.

If I finish and sell faster, even better.

This is definitely a lot to take on for a first time flip but I did put $10,000 earnest money down already and don't want to lose that. With all this information about the home, do you think there is enough of a profit margin to work with? It has been vacant for a couple years, do you think that there might be additional problems that will skew my numbers in a large way? Is 80k enough for a renovation this size ? My biggest fear is that there may be a huge issues that arises that prevents me from being able to sell my house. It could just be fear talking. Also, my backup plan may be to do a cash out refinance and leave some cash in the house but not 100% sure what the best option is yet. I would greatly appreciate advice and opinions. Would these numbers make sense to you and is there anything that I may be missing?

All we care about it the numbers, NOTHING else matters. ALL IN just under 510kKISH, Sell for NET about 560 net, TERRIBLE deal do not do it , WAY too tight. FL the bubble is going burst.

Good luck

PS find a better deal, this is not good

0 Reply

Gabriella Borukhov

OP

New to Real Estate · Member since 2021 · 21 posts · 14 votes

2y

Quote from @Bob S.:

Quote from @Gabriella Borukhov:

I finally decided to invest in a fix and flip. Everything was making sense until I had a bunch of people around me tell me it's a huge risk. Now I'm so scared because I don't want to lose money and have a bad experience. It is my first flip and it is quite a "bigger" flip but the numbers made sense to me and wanted to know what some of you experienced investors think.

Some details about the property. It is about 1900 sq ft. It is located In Florida. Owner died and house has been vacant ever since. There was a probate. I did get a inspection done. Roof was done 10 years ago but there were some leaks identified so inspector recommended that I change the roof. It's on a block lot, no foundation issues were identified. HVAC is updated. Plumbing looks good as well. (Water ran for about 6 minutes). Electricity is good as well. Only issues that we have identified that we need to fix are cosmetics. Completely renovate the kitchen, 2 small size bathrooms, floors all over, "freshen up the windows" (windows were pretty old but contractor said we might not need to change them), cut off tree branches on top of the roof, add a walkway in the front. There was some termite damage on the fascia as well. Also, rodent droppings were detected.

Home price is $369,000

Rehab given is $80,000

Down payment is $44,900

Loan amount that I will owe back is $404,100

Loan is for 6 months

Holding cost for full 6 months is ($3500*6) = 21,000

Closing cost = 19,553

ARV = 575000 (my agent said $600,000 but I am doing 575,000 to be conservation, with the way the market is going I do question if I should estimate it lower)

With my math, using the full rehab loan and full 6 months with selling costs included, I estimate around a $53,000 profit.

If I finish and sell faster, even better.

This is definitely a lot to take on for a first time flip but I did put $10,000 earnest money down already and don't want to lose that. With all this information about the home, do you think there is enough of a profit margin to work with? It has been vacant for a couple years, do you think that there might be additional problems that will skew my numbers in a large way? Is 80k enough for a renovation this size ? My biggest fear is that there may be a huge issues that arises that prevents me from being able to sell my house. It could just be fear talking. Also, my backup plan may be to do a cash out refinance and leave some cash in the house but not 100% sure what the best option is yet. I would greatly appreciate advice and opinions. Would these numbers make sense to you and is there anything that I may be missing?

All we care about it the numbers, NOTHING else matters. ALL IN just under 510kKISH, Sell for NET about 560 net, TERRIBLE deal do not do it , WAY too tight. FL the bubble is going burst.

Good luck

PS find a better deal, this is not good

what do you think if I can negotiate price down to 340,000?

0 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Gabriella Borukhov:

Quote from @Bob S.:

Quote from @Gabriella Borukhov:

I finally decided to invest in a fix and flip. Everything was making sense until I had a bunch of people around me tell me it's a huge risk. Now I'm so scared because I don't want to lose money and have a bad experience. It is my first flip and it is quite a "bigger" flip but the numbers made sense to me and wanted to know what some of you experienced investors think.

Some details about the property. It is about 1900 sq ft. It is located In Florida. Owner died and house has been vacant ever since. There was a probate. I did get a inspection done. Roof was done 10 years ago but there were some leaks identified so inspector recommended that I change the roof. It's on a block lot, no foundation issues were identified. HVAC is updated. Plumbing looks good as well. (Water ran for about 6 minutes). Electricity is good as well. Only issues that we have identified that we need to fix are cosmetics. Completely renovate the kitchen, 2 small size bathrooms, floors all over, "freshen up the windows" (windows were pretty old but contractor said we might not need to change them), cut off tree branches on top of the roof, add a walkway in the front. There was some termite damage on the fascia as well. Also, rodent droppings were detected.

Home price is $369,000

Rehab given is $80,000

Down payment is $44,900

Loan amount that I will owe back is $404,100

Loan is for 6 months

Holding cost for full 6 months is ($3500*6) = 21,000

Closing cost = 19,553

ARV = 575000 (my agent said $600,000 but I am doing 575,000 to be conservation, with the way the market is going I do question if I should estimate it lower)

With my math, using the full rehab loan and full 6 months with selling costs included, I estimate around a $53,000 profit.

If I finish and sell faster, even better.

This is definitely a lot to take on for a first time flip but I did put $10,000 earnest money down already and don't want to lose that. With all this information about the home, do you think there is enough of a profit margin to work with? It has been vacant for a couple years, do you think that there might be additional problems that will skew my numbers in a large way? Is 80k enough for a renovation this size ? My biggest fear is that there may be a huge issues that arises that prevents me from being able to sell my house. It could just be fear talking. Also, my backup plan may be to do a cash out refinance and leave some cash in the house but not 100% sure what the best option is yet. I would greatly appreciate advice and opinions. Would these numbers make sense to you and is there anything that I may be missing?

All we care about it the numbers, NOTHING else matters. ALL IN just under 510kKISH, Sell for NET about 560 net, TERRIBLE deal do not do it , WAY too tight. FL the bubble is going burst.

Good luck

PS find a better deal, this is not good

what do you think if I can negotiate price down to 340,000?

20k more still not good, I am not investing 510k without getting 100k or more net,

All the best

1 Reply

Evan Polaski

Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes

2y

@Gabriella Borukhov, is this a home run: probably not (time will tell). Is there risk? Of course, as Russell noted. Is this a terrible deal in Bob's eye's? Apparently.

At the end of the day, anything we say is irrelevant. If a 20-50k profit is worth it to you, and you are looking to get started flipping, then sounds like you have a decent deal. You have an inspection. Presumably, you have some actual bids behind your $80k budget.

I tend to be a bit of a gut feeling person, and your gut told you to go with it. It is not uncommon to have concerns. I also had concerns when I bought my first rental for all of $22,500. I was thinking: why did I get this deal? What did I not see that more experienced investors saw? That is fear and growth speaking. Get over it and charge forward.

You don't have a huge margin, but you have a margin for error. Stay on top of your contractors. Don't pay contractors based on "percentage", get your bids based on milestones. Get several bids. Don't rush into work right away at the expense of getting several bids. Don't go with the contractor that can "start now" over the one you are more comfortable with that can start in a month.

2 Reply

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

2y

@Bob S. where are you getting 510K? In terms of what she is investing I have a total cash in at 45K with the rest being borrowed on what looks like hard money/rehab loan.

She is taking on 400K worth of debt/risk to do it, yes but that is a different thing, yes?

What am I missing?

0 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Jonathan R McLaughlin:

@Bob S. where are you getting 510K? In terms of what she is investing I have a total cash in at 45K with the rest being borrowed on what looks like hard money/rehab loan.

She is taking on 400K worth of debt/risk to do it, yes but that is a different thing, yes?

What am I missing?

HMM I read is my math incorrect ? 370k CC 21K,CC 20k OH NO, I somehow did 510k, NO Its 410k PLUS 80k, SO ALL IN just under 500k,,,, my bad, still a bit tight,

WOW sorry everyone,

Home price is $369,000

Rehab given is $80,000

Down payment is $44,900

Loan amount that I will owe back is $404,100

Loan is for 6 months

Holding cost for full 6 months is ($3500*6) = 21,000

Closing cost = 19,553

1 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@Gabriella Borukhov

I don't see 53K if you sell at 575K. purchase for 370 + rehab of 80 + closing of 20 + holding of 21 = 491

sell at 575K minus 10% for realtors fees, closing costs, concessions = 517,500, minus 491K = $26,500

then you'll pay taxes on it. what am i missing? with a sell price of 575 most would want 10-15% profits. so this seems thin.

i can't tell you whether to do it or not, but this is how i would look at it.

2 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@Jonathan R McLaughlin

I'm trying to get straight on the numbers too

0 Reply

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

2y

@Gabriella Borukhov

I'm kind of with Evan here. I don't know the market so IF your numbers are right it seems like your upside is there and you do have a decent margin and percentage return.

This is not that big a flip really. Seems in the sweet spot financially and that does not sound like a lot of rehab. I love the "cosmetics" piece too. You aren't taking on anything that sounds too complicated and bathrooms, kitchens, paint and floors are all big bangs for your buck.

If the roof is really only 10 years old (not "about 10 years" which means probably 20) then I would consider just repairing it if you can locate the leaks and it looks decent. In any case, a replacement is straightforward.

I don't mean any of this is easy to accomplish mind you, just that you seem to have chosen the right problems to work with instead of finding something with structural issues.

0 Reply

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

2y

@Bob S. @Nicholas L. now I'm not sure where I came up with my numbers :) but feels like where you guys landed is right, maybe I missed adding in the closing costs. I think thats it...definitely feels thin.

@Gabriella Borukhov a chance of outperforming this by operational success but boy that is iffy, especially for a first flip. Rehab estimates rarely come in lower! I could see going ahead only if I had a contractor I was VERY confident in.

Where are you getting the 80K rehab from? I have you at:

floors throughout (vynal? hardwood? can you clean up)

2 small baths--these can often be made pretty nice for minimal expense, what kind of rehab do they need?

kitchen--how big and whats the standard of finish in the market? What is it now?

Windows--what kind, how many and is this included in the 80K?

exterior paint and landscaping? adds up...

OTOH...probate and cosmetic rehab can be a good foundation for success, and there will be a lot more opportunities come up and you will be up to speed.

1 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Jonathan R McLaughlin:

@Bob S. @Nicholas L. now I'm not sure where I came up with my numbers :) but feels like where you guys landed is right, maybe I missed adding in the closing costs. I think thats it...definitely feels thin.

@Gabriella Borukhov a chance of outperforming this by operational success but boy that is iffy, especially for a first flip. Rehab estimates rarely come in lower! I could see going ahead only if I had a contractor I was VERY confident in.

Where are you getting the 80K rehab from? I have you at:

floors throughout (vynal? hardwood? can you clean up)

2 small baths--these can often be made pretty nice for minimal expense, what kind of rehab do they need?

kitchen--how big and whats the standard of finish in the market? What is it now?

Windows--what kind, how many and is this included in the 80K?

exterior paint and landscaping? adds up...

OTOH...probate and cosmetic rehab can be a good foundation for success, and there will be a lot more opportunities come up and you will be up to speed.

I would not do this deal , If he can get it for about 50 75k less sure,

Good convo guys,

2 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@Jonathan R McLaughlin

yes some big ticket items here. i don't know what things cost in FL but the walkway and roof are big ticket items.

1 Reply

Alicia Ota

Real Estate Agent · Los Angeles · Member since 2023 · 2 posts · 0 votes

2y

Hey I'm new here, just testing this out to see if this works. Any ways I'm an agent / designer out here in Los Angeles. I also developed my first home from land out back in 2020. Any developers or fix and flippers out in the LA area?

0 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

2y

If you're going to be a fix and flipper in today's world of high rates, gotta do pure cash not HMLs. And if you're going to do it in winter, better be out by spring and not earlier. Seasonality and these rates will make it super close. You have to eat that buy time on these HMLs. Then margin wise are you covering the cost of commissions, taxes, etc.?

Personally, not in my risk bucket if I am using leverage. If you had cash for the whole venture, I would definitely pursue it just cause it's a good area from what I can see.

Unless you're construction crew is able to fix at cost, and subsidize the construction I would venture into a different REI pursuit.

I fix & rent out of state. It's not easy and not for the faint of heart, or the one's stressing about small variances in finances. It really takes a load on your life.

0 Reply

Timothy Howdeshell

Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

2y

1. Yes, this is a huge risk. But you can de-leverage your risk in several ways

a. hire an experienced PM or partner with an experienced operator in exchange for some of the profit.

b. finish the project quickly and provide financial incentives to the contractor to do so. Market risk is huge on flips. All your numbers are based on things today, but if there's a correction in 6 months it's a different story. If your ARV is accurate though (and I like that you're being conservative) you would need a 10% market decrease to break even. Seems safe enough.

c. run a tight ship with you contractors. Stick to the contract. No sob stories. Do not pay ahead of the work. Only give a draw once the work has been verified complete and to standard. Have a 3rd party check this and don't just rely on the GCs word (trust but verify). Get a lien waver for the work completed after each draw. Hold back a portion at the end until final inspections are completed by the third party. Ensure that the contractor is licensed, bonded and insured.

2. We cannot say if 80k is a good budget. Local labor and material rates, the scope of work, and other factors make this impossible to know based on the info you've provided

3. Insurance in Florida is a mess I hear. Make sure that you get a builder's risk policy.

4. I don't know where 600k is relative to the neighborhood, but it seems like a decent house. Don't cut corners on rehab (windows) as it will make buyers nervous about where else things have been skipped. More of a visual thing.

5. You need to get a qualified pest control person to treat the home. Buyers will want to see this if you have knowledge of issues prior.

Off of the top of my head, that's what I can think of. No matter how big or small the project is, the first few are pretty nerve wracking. If you have the advice of trusted experts, feel confident. Are the naysayers doing what you want to be doing (flipping houses successfully)? If not, there advice isn't really worth a lot here. Best of luck!

0 Reply

Mike Klarman

Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes

2y

So, certain parts of Florida are a nightmare with permits. Can take 90 days to get them. I'd look into that.

On a sale of 575k, you want the project costs 425k or less. Which it looks like you are about there, maybe slight over when holding and closing costs are figured in.

So what worries me:

1) This is six months. You can find yourself up against the clock very easily, especially if permits are needed.

2) You are getting 88% leverage approximately, looks like by my calculation like 10.4% interest rate. 42k in interest on 404k is about that.

3) What are the 19k in closing costs? Let's say you paid two points, that's 8k and maybe 2k for title that's 10k. Maybe 2k insurance that's 12k. What are the other costs here?

If you think this is a slam dunk sale for 575k, you trust your contractor, you trust your agent, then you are at about cost wise where you should be. These are very good terms for a new investor, very good. Other than the 6 months term. The rate and leverage are very, very good though. Most would kill for these terms on deal one.

0 Reply

John Landskroener

Orlando · Member since 2023 · 61 posts · 13 votes

2y

If it becomes necessary to get a better arv rent it for a year or two to try to help recoup some of money. I understand you'd need to redo the loan but it shouldn't be too difficult especially if it's complete and the appraisal will be high enough.

0 Reply

Getting cold feet... please help run my numbers

Getting cold feet... please help run my numbers

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