How much money should I be expecting to make from flips?

Question

I'm ready to buy my first rehab project and I've been running the numbers and kind of disappointed about what I'm finding. I get my deals through local wholesalers.... My price limit is $150,000 for the whole project. The numbers are telling me to expect only between a $9,000 - $17,000 profit.

I was hoping for more than that.

Brian Pulaski · Answer

Are you using wholesalers numbers, or running your own? I just got some wholesaler prices and houses in my email and honestly some of them are laughable. The ARV I saw on one was the absolute max any house in the neighborhood could get. The house in question is the absolute worst location in that neighborhood. The rehab estimate is nearly $10k less than I have ever spent, and did not even mention the exterior of the house, which is one of the ugliest in the neighborhood. I would approach ALL wholesale deals as simply an asking price and an address, and go about my own ARV and rehab costs.

Will Mace · Answer

@Patrick Philip

The phrase "buy low, sell high" does not only refer to stocks.  Remember, you make your money when you buy it....not when you sell it!  Buy it at the RIGHT price, control your rehab budget & you will make money.  If you can't buy it at the right price for your intended goals, then it is not the right property.  It may take you 10-15 offers to find the right one, but you'll find it if you keep looking.

Steven Mitchell · Answer

I would find three investors who successfully flipped with the wholesaler before you commit to them. This simple step would have saved me tens of thousands last year.  I paid for my laziness.

Johnny Quilenderino · Answer

Patrick, that is a reasonable amount. Start small, then work up to bigger projects. Or save up enough to work multiple flips at that price. Good luck.

Johnny

Steven Mitchell · Answer

@Patrick Philip  Most realtors opinions are shit and they cannot be held accountable legally when you make financial decisions based on their advice.  Our realtor used comps from a historic district a few blocks over for our purchase which over estimated the ARV by 100k.  She made her commission, we were stuck with the massive loss.  You have got to learn to do your own CMA before you start doing this.  My two large losses this year happened because of bad, fluffed CMA's that we went by because we bought before we had access to comps ourselves and had a general knowledge of the neighborhoods.

Like you, we were looking for an easy button.  Push it, and out comes an accurate ARV and rehab estimate.  We never found one.  Its a skill developed by the investor.

We have never found a wholesaler who could source a good deal.  If youre going to use one, find and meet in person three people who have used them first.  This simple step would have saved me months of my life and thousands of dollars. Do not be in a rush to get started! It will color your judgement.

Anthony Dadlani · Answer

We like to see a potential 25% gross profit on pre analysis. That number seems to cover any unforeseen expenses and still walk away with a good risk/reward. Agree with what others wrote that its a very subjective number and everyone has their own personal targets.

Best of luck in all your endeavors

Brian Pulaski · Answer

@Patrick PhilipThat is a good start. I assume the realtor did a CMA on the property? Are you saying, even with your $10,000 higher ARV, the houses are only giving you $9-17,000 profit? How much profit is he telling you the house "should" bring?

I would also scrutinize his renovation costs. This is probably the more difficult one to actually determine. I also would not just accept his price, I would always negotiate and only stick to the numbers that work for ME, not him.

Patrick Philip · Answer

I double check the wholesalers price with a realtor. So far, I've looked at 2 and the wholesalers were pretty accurate both times. In fact, the wholesaler has the ARV listed at $165k on this one and my realtor told me I could get up to $175k in her opinion.

Will Barnard · Answer

I could not ageee more with Brian above. Most (not all) wholesalers either have no clue how to evaluate a rehab budget or an ARV or outright lie about it. I have seen it over and over again. So to say that a wholesaler price is not negotiable is completely laughable.

As another said, start small like you are talking about. Even if you just break even consider that a huge gain as your profit is in the experience! If you want to make more money in the future, you will have to step up to higher price points or absolutely steal a deal (not going to happen if u shop on the MLS.

How much money should I be expecting to make from flips?

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