Updated almost 8 years ago on . Most recent reply
- Realtor, General Contractor, and Developer
- Redding, CA & Bend OR
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Fix and Flips - What do you consider acceptable profits?
We have always built spec new construction. However; it seems like there's some opportunities in fix and flips in a few places that I've seen. What do you consider an acceptable profit on a fix and flip deal?
- Karen Margrave
Most Popular Reply
Lots of variables, but if I had to reduce it to one metric, I would use:
Minimum profit of 15% of ARV.
So, on a house that we believe will resell for $400,000, we'd be looking for a minimum profit of $60,000.
That said, here are a few additional thoughts:
- Obviously, not all rehabs require the same amount of time and risk, so if we run into something that is out of the ordinary for either (much quicker/longer or much lower/higher risk), we will adjust that requirement.
- These days, good deals are hard to find. So, we've reduced that requirement on a couple deals down to about 12%.
- Given that were are likely near the top of the market (just statistically speaking), I'm not a fan of projects that will take a long time. Therefore, I will generally require a higher return on any projects that will take more than about 6 months.