How do you run YOUR numbers?

14 Replies

What is the formula you use to run your numbers on a flip? 

I was recently listening to a BP podcast and Brandon talked about how every property has a number. How do you calculate your number? 

That link has an equation:

Max Purchase Price (MPP) = Property Sales Price (PSP) – Fixed Costs (FC) – Desired Profit (P) – Rehab Costs (RC)

That is,

Property Sales Price (PSP) = Max Purchase Price (MPP) + Fixed Costs (FC) + Desired Profit (P) + Rehab Costs (RC)


While I understand all these numbers can vary considerably given the property, is there a rough rule of thumb for the splits? For example, rehab costs roughly 23% of total (see following example numbers)?

Property Sales Price (PSP) = $300k

Max Purchase Price (MPP) = $210k (70%)

Fixed Costs = $14k (4.6%)

Desired Profit = $7k (2.3%)

Rehab Costs = $69k (23%)

@Calvin Strain PP = ARV - 10% ARV - Repair - Profit

Steven D Nicholson No, repairs have no percent on anything.

What is your 10%ARV? Is that costs associated with a sale?

Thanks!

My error. I see the formula now:

ARV $XX
Less Profit (20% ARV) $XX
Less Close (10%ARV) $XX
Less Repair $XX

=MAO $XX.

Then can always add in 'purchase costs' (eg cost of money etc) for greater accuracy, and adjust the percentages to fit. 

Thanks!

@Calvin Strain It is an amount of money I want to make. If I want 100k on a 100k exposure, that’s the number. If I want 200k on a 150k exposure if I partner with someone, then i plug in 200k.

Steven D Nicholson 10% ARV covers all incidentals, agent fee, holding fee, other closing costs, staging fee, etc etc etc. In smaller markets, you can increase them, but in LA, 1% of 1M is 10k.

@Manolo D. for sure. Is there a certain % you shoot for in your profits or do you just randomly choose a number?

@Calvin Strain Around 10k/mo for solo so around 60-90k. if I expose money, then the same amount, whichever is higher vs 10k.

I was recently in Oakland for a conference. A presenter was describing the flips they were doing in CA. The margin was 13%. I asked what level of risk were they willing to take to accomplish their goals. For me, 13% is too small. That is one market correction, price reduction, or sitting on the property for an extra 2 months. The formula we have used is (Completed ARV - repairs) * .70 = Max Purchase Price. Does it exclude a lot of purchases - yes. More importantly, does it keep us safe - yes. We have survived two major recessions by not over buying.

Originally posted by @Manolo D. :

Calvin Strain PP = ARV - 10% ARV - Repair - Profit

Steven D Nicholson No, repairs have no percent on anything.

Note that the 10% number will be different for each investor.  This the "fixed costs" of the project -- purchase costs, holding costs, selling costs.  If you're paying cash, 10% is about right.  If you're getting a hard money loan, that can take this number to 20% or more (depending on how long the project lasts).  Also, taxes and transfer taxes can have a big impact on this number, especially for big projects with long hold times.

Yup. @J Scott is correct. Normally thats assuming sold at 6 months after purchase, and agent fees are at 3-4%.

Originally posted by @Calvin Strain :

What is the formula you use to run your numbers on a flip? 

I was recently listening to a BP podcast and Brandon talked about how every property has a number. How do you calculate your number? 

I don’t know what all the different abbreviations means so I may be repeating what others am said above

For me personally I am willing to invest 55k to make 45k bottom line profit

I think the 2 I am working on now will be more like paid 30k  fixup 25k.  Will probably sell for 140k no agent so maybe 6k in closing costs.

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