I am getting ready to put an offer in on my first flip! Any feedback is very much appreciated. It is a 2 bedroom 1.5 bath condo located in Annadale, Virginia. I will be using a hard money lender only to acquire the property. I will fund the rehab and holding costs myself.
Purchase price: 140,000 (this is what I am going to offer. It's listed on MLS for more)
Closing costs: 2500
Hard Money Lender: 8,200 total
Total expenses: 53,100 + 140,000 purchase price = breakeven is 193,100
Potential ROI = 26,900
I am looking at a 3 month timeline: 2 months for the rehab and 1 to sell. The condo is 1011 sq feet and needs a cosmetic rehab (paint, fixtures, kitchen/bath update, etc). No knocking down walls or anything major will be done. I am hoping it will take less time to finish but wanted to play it safe with my numbers. I built 5,000 for anything unexpected into the rehab budget.
Comps in the same complex are selling for 210,000 - 225,000, some aren't even updated. They have been selling in less than 20 days. Some even sold in less than a week.
I will make the offer today and if it is accepted I will have an inspection and a contractor estimate the rehab to make sure I am not far off. I am offering significantly less than the listing price so fingers are crossed!
Does anyone see anything wrong with my numbers? Any expenses I left out?
Thanks in advance for your expertise!
How much will your SELLING costs be? (Marketing? Staging? Commission? Misc?)
Would Investors be interested, or can you ONLY expect it to be bought by an Owner-Occupier?
$25k seems like a too round (ie. pro forma) rehab cost. Are you SURE it won't be more? Cheers...
My selling costs were what I listed as REA and closing costs. I wasn't planning on staging it because none of the comps that sold were staged. Do you suggest I stage it anyway?
I am expecting it to be owner occupied but an investor buying is a possibility.
I estimated the rehab budget at under 20,000 then increased it by 5,000 for safety. I won't know an exact number until I have a contractor walk through if my offer is accepted. I estimated $20 per square foot to get the 20,000.
A few of these numbers are estimates I did after research such as the rehab, closing costs, utilities and insurance. I tried to over estimate to leave room in case I misjudged anything.
I appreciate your feedback!
@Brent Coombs I apologize, I didn't tag you in my reply.
@Rhianna Raslan , I instinctively don't like the idea of staging eg. putting in beds and chairs that are slightly smaller than "real" ones - to give the IMPRESSION that the room is bigger than it is!
Nope. Don't like those tricks at all! [I often wonder: why are buyers-with-money so gullible?]
No, if you can get your proper ARV sale price without staging or slick marketing, good. Cheers...
@Rhianna Raslan Buying your first flip is exciting! I would see if you could get a couple staging companies in the area to at least give you a quote. Although I am not personally fond of it, there are ways you can stage it with "virtual furniture". Can be a lot cheaper, and get that potential buyer in the door. If your market is super competitive, and the DOM aren't high, you may be able to skip it.
@Rhianna Raslan . Good Luck on your First flip. Numbers look good.
I would advise you to do your work on the contractor you will be using. Since you will use a hard money lender to acquire the property it is important for the project to get completed as soon as possible. Costs can increase very quickly and ultimately hurt your potential ROI if the project takes a lot longer than you expected.
I am also looking for my first flip, but wanted to add that there is a group in my area that flips homes regularly and they have prop furniture for flips for staging and such.. like plastic and cardboard replicas and such.. looks decent in person, in pictures you cant tell it is fake..
That's super exciting.
I can't comment on the math, as I don't know enough to make heads or tails of a deal yet but....
Exciting regardless haha
Here are some before and after pics of them setting one up for sale..
@Brent Coombs I didn't know they used smaller furniture! Thanks for pointing that out. I'll keep it in mind.
@Devin C It is very exciting! I hadn't heard of virtual staging but looked it up when I read your comment and I must day I'm not too fond of it either. I'm going to call some staging companies today and get quotes.
@George Despotopoulos Thanks! I will be sure to do that. I definitely want to get it all done in under 3 months.
@William Huston That staging is interesting. It doesn't look fake with the coverings. Thanks for sharing.
@Gaege Root I am excited and nervous, but mostly excited.
Thanks again for your feedback everyone. I am anxiously waiting to hear if my offer was accepted. I'll keep this thread updated!
Hello and congratulations on jumping into the abyss which is real estate investing .. First I am a big fan of staging if you asking top dollar for your property , I don't think it is always nessesary in a market where the houses are only on the market for a average of 20 days , so in my opinion save your money .. That being said your numbers don't add up that well . I mean they add up but the Roi isn't the greatest .. Have you used the Bp flip calculator ? I input your number quickly and it projected that your only going to get around 14% Roi which I suppose isn't bad but I myself wouldn't touch a property for that little return when I'm risking $200k but then again I don't use a hard money lender so all of my investments is cash. I usually move forward when I get the numbers up around 25-38% . Not to say i haven't done a deal under that but my first one ? It's a bit more of a risk then I would be willing to make. If anything goes wrong and it often does, then you could be on the loosing end. Which I wouldn't want to see happen to anyone but maybe the banks ..lol .. I'm not saying don't do it all I'm saying is be cautious . How are you at estimating ? Do you have construction knowledge ? See if you can get your contractor to walk through before you put your offer in. If it is a bank owned home and you feel confident in the rehab and the roof and the foundation then maybe consider a lower offer but with no contingencies which is a big risk but banks love not having them and I have seen them take offers lower then others when there are multiple just because of that clause being omitted from the offer.. Like I said though you have to be real confident and do your due diligence very well .. Don't be afraid to get a ladder to get a closer look at the roof or attic .. Look in the basement or crawl space .. Look at the foundation for levelness and cracks .. Take a level with you every time you look at a property .. Don't be afraid to push the limits when it comes to inspecting a potential property ... This is a huge investment and you want to take this puppy around the block a few times.. I wish you only the very best .
God Speed ,
@Rhianna Raslan My only question is with your timeline. I'm not familiar with your area at all, but one month seems a short time unless most of the sales are cash. Typically my experience lately with a financed buyer is I'm looking at 6-8 weeks from contract to closing. That extra month of time can start adding up especially with hard money.
I've got your total out of pocket at around 37k with a 73% ROI if this goes as expected. I know @Michael Short was basing his calculation on your total risk.
Either way, I agree with him that this deal is a little slim, but I would still do it if I trusted the numbers. My primary concern is the 25k rehab budget being enough. Since this is a condo, you don't have to worry about roof or foundation - that's a definite plus. That said - you can chew through that 25k quickly even in a cosmetic renovation. I would recommend you come down another 10k on your offer, just for a little added pad. Also, as others have said, confirm your rehab numbers with a couple of contractors you can trust - either before you buy or during contingency period (if you have one).
Best of luck! Please let us know if you get the house!
I didn't see that it was a condo .. In that case make sure also that you are comparing condo sales and not sfh sales , once again comparing it to Florida .. Sometimes condos sit on the market much longer other than that
@Bill Hinshaw is right on target with his advice . If they reject your offer or counter your offer then you can always go up on your offer if you feel that stongly about it and your numbers . Who knows you might just get it for what you offer ...best of luck
@Michael Short I didn't use the BP calculator. I'll check that out. I do not have construction knowledge but it is a 1 bedroom condo so there won't be any roof/structural issues. I am going to have an inspection done if my offer is accepted though. The property is not bank owned. I would not be disappointed with a 14% return on my first flip because the knowledge I will gain is invaluable to me. That being said, of course I will be pleased with bigger ROI.
I only compared comps that were condos of the same layout in the same complex. No SFHs. I appreciate the advice!
@Matt Stewart I am hoping to have the condo finished in about 6 weeks and that would give me 6 weeks to sell. I did the math accounting for an additional month of the hard money loan and expenses and I am okay with that if it comes down to it. Not ideal though.
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@Bill Henshaw Thanks for the advice! I will definitely have a few contractors check it out. I think he was calculating it based in total risk as well.
Just wanted to updated everyone and let you know that my offer was rejected. I don't feel comfortable paying any more than I offered so the search continues!
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