Seeking First Flip Guidance

[Westen O'Brien]

Hi,

I'm currently active duty military and plan on going full-time into real estate investing when I transition out of the Army.  I'm looking to "get my feet wet" by flipping two houses before I transition, but haven't done a single deal yet.  My business partner (just ended active duty service) and I have our eyes on a specific property, and I'd like to run the situation and numbers past you guys on BP to see if we're thinking about this correctly, or if we're completely ignorant:

The house has been owned outright by an older couple since 1985.  Through a connection with the realtor we're working with, we know the couple just wants to sell it with no hassle when their older children move out in about 2 weeks.  The house is outdated and hasn't been kept-up-with well.  It's not on the market yet and their realtor offered to let us look at it before it goes on market.

Word is they'll ask for around $50,000.  Comps are around $95,000.  We need a closer look, but anticipate ~$15,000 rehab costs, ~$6,000 commission upon resale, and ~$2,000 holding and closing costs.  Is it me, or is following through on this a simple way to net around $20,000 for me and my business partner?

What things am I completely unaware of that I need to be looking out for?

Thanks for your time.

[Patti Robertson]

$15K seems pretty low for a rehab unless it just needs paint and carpet.  You said it is "outdated" which generally indicates it needs a kitchen/bath(s)/possible floor plan alteration.  If it needs exterior work - siding/paint/roof/windows, you could end up spending $40K+.

Some items you are missing are...

- Insurance & taxes (I don't know your market but $2K would be too low for both closing and holding costs in my market.)

- The cost of money if you are borrowing

- Staging cost if you plan to do that.  (We stage all our flips.)

- Buyer closing cost assistance - $0-6%.  I use 3% in my budget.

I'd suggest finding an experienced flipper in your market and asking them to review your budget.