California flippers, what are your profit margins?

8 Replies

Just curious to see if my numbers are better or worse than the average. I'll start, on my last 3 flips it was 9%/5 months, 17%/3 months, 16%/4 months. This is on total project cost with no financing, before tax.

Originally posted by @Dylan Vargas :

@Nancy Zhao Welcome! Can you give more detail on the numbers of say last one? Like  house cost, renovation costs, selling costs, profit. Thank you!

 Sure. My last project was 770 acquisition cost, 70 reno+staging, 45 selling, profit before tax 140.

those are great gross numbers and of course you need that for that price point as the risk of going back wards is greater.

for us  15% of gross is a great day.. 10% is avearge.. anything over 15% is a HOMERUN

@Nancy Zhao ...That is a home run. I look at the total and not the percentage. 140k is fantastic and the envy of many. On smaller flips (mostly entry level housing) I am ok with 20k at the low end as long as I dont lose money. Now I wouldn't spend 700 k to make that 20k I am talking about 140 to 210k and a worst case scenario. I do want to start venturing into flips such as the one you stated. My goal is no less than 20k worst case scenario up to 100k on my entry level flips in Northern California.

Originally posted by @Dylan Vargas :

@Nancy Zhao ...That is a home run. I look at the total and not the percentage. 140k is fantastic and the envy of many. On smaller flips (mostly entry level housing) I am ok with 20k at the low end as long as I dont lose money. Now I wouldn't spend 700 k to make that 20k I am talking about 140 to 210k and a worst case scenario. I do want to start venturing into flips such as the one you stated. My goal is no less than 20k worst case scenario up to 100k on my entry level flips in Northern California.

 entry level flips on the west coast are just uber competitive to buy.. especially in our market were your competing with contractors who do their own work if they can make their normal construction profit and another 10 to 15k they are going to do that.. and that knocks out most of us who don't do the work ourselves.. I had more than on contractor borrower of mine that finally figured that out got enough equity from relatives and now they are doing quite well and no way we can compete with them.

but you start moving up north of 750k to purchase and unless your in the Bay area or prime LA  that does knock out a lot of competition

and you also have to remember this poster is paying CASH  HUGE difference as she has no cost of capital most of us need to borrow and if your borrowing HM which 95% have to as banks really don't service this niche ... her carrying cost ona say 700k project would eat up 20 to 30k EASY..  but still great numbers..

Originally posted by @Jay Hinrichs :
Originally posted by @Dylan Vargas:

@Nancy Zhao...That is a home run. I look at the total and not the percentage. 140k is fantastic and the envy of many. On smaller flips (mostly entry level housing) I am ok with 20k at the low end as long as I dont lose money. Now I wouldn't spend 700 k to make that 20k I am talking about 140 to 210k and a worst case scenario. I do want to start venturing into flips such as the one you stated. My goal is no less than 20k worst case scenario up to 100k on my entry level flips in Northern California.

 entry level flips on the west coast are just uber competitive to buy.. especially in our market were your competing with contractors who do their own work if they can make their normal construction profit and another 10 to 15k they are going to do that.. and that knocks out most of us who don't do the work ourselves.. I had more than on contractor borrower of mine that finally figured that out got enough equity from relatives and now they are doing quite well and no way we can compete with them.

but you start moving up north of 750k to purchase and unless your in the Bay area or prime LA  that does knock out a lot of competition

and you also have to remember this poster is paying CASH  HUGE difference as she has no cost of capital most of us need to borrow and if your borrowing HM which 95% have to as banks really don't service this niche ... her carrying cost ona say 700k project would eat up 20 to 30k EASY..  but still great numbers..

 This is spot on. Anything below 500-600k to buy is so ridiculously competitive you pretty much have to be a contractor yourself to make a worthwhile profit, but the deals get progressively better as the numbers go higher.  I was recently outbid on a project that probably would've grossed a good 250k+ in profit... but you needed over $1.3m cash just to buy the property.

I do both wholesales and flips in the Sacramento area. Profit margins on flips have been between 30k to 80k pre tax. ARV is usually about 250k-300k. However, I'm not including my marketing cost to find these deals.

I think it's really interesting that you're finding high end flips to have less competition and higher profits. It's always been a scary thought to me since your buyer pool is so limited and your holding costs are so high!