Fix and flip cost-profit question

10 Replies

I am a wholesaler In the springfield MA area trying to figure out if a deal is worth it/ if anyone is going to buy the contract due to a lot of work on the property to get to ARV. It’s buy for 60k, 40k rehab costs, and ARV 150k. So the question is this... what typically does a rehabber look for in terms of relating cost of repair to profit. this house is 50k profit... just so I know what to sell the house for and stop wasting peoples time.

You should start at ARV then subtract 60-70% depending on where it's at in Springfield. Then subtract repairs, realtor cost, and closing cost and you should be able to sell fast give me a call if you need any help maybe this is something our team can buy 3058511979

$60k purchase and $40k rehab on a $150k ARV property does not leave the investor with $50k profit. What about closing costs on both the purchase and the sale? Holding costs during the rehab? Realtor/broker commissions to sell? That "$50k in profit" quickly gets diminished when you analyze a deal and run the numbers properly.

Originally posted by @Louis Siano :
@Darren Lenick that IS a price per square foot cost that I guesstimated! Do you recommend getting a contractors opinion even though I’m trying to close this deal quickly and trying to keep my margin as high as possible?

Using a blanket cost/sf is not a good way to come up with a rehab estimate/budget. Even guys who have been doing this for decades with hundreds of houses under their belt would probably be hesitant to just use a $/sf. You need accurate numbers and scope of work. 

@Louis Siano Time is always critical however you could lose time during closing If a fix and flip pro comes in and runs his/her numbers and discovers your numbers are way off. I’d recommend making good friends with a contractor who can give you a “rapid quote” on repairs. I say “rapid quote” meaning they can professionally eyeball the job by walking the house and create a “rough” estimate. No quote is all inclusive as there are ALWAYS things that can’t be seen in walls and below floors. I’d work with the contractor on the premise that you’ll pass on his/her quote to the buyer. This doesn’t create any more work for a contractor then if they were quoting any other job AND you’re being a source of referrals for that contractor. To protect yourself, make sure you note that you are simply offering the quote for reference and not as a guaranty of what needs to be done. I’d also not give a detailed quote, only a summary of what would be done and a single price at the end. Most contractors with experience will already have a disclaimer that there will “likely” be additional work that can’t be determined without opening walls, etc. Hope this helps you and good luck selling the property.

@Louis Siano Investor wants 25% return at least.  Sometimes, we, as investors hit it bigger than that, but 20-30% is what it takes. I'm in and out of properties daily.  Do alot of rehab cost analysis.  99.9% of the rehab costs that wholesalers give is too low.  I always want to think it is not due to dishonesty, it is more of an issue that they are sales people and not construction people. BUT, depending on a wholesaler's rehab numbers will usually get you into trouble.