Average Flip ROI?

Question

I am wondering what the average ROI (%) for your flip is from start to sale based on how much cash comes out of your own pocket.

Thanks

J Scott · Answer

It depends on whether I fund the flip with my own cash or whether I leverage, but...

For cash purchases, I generally see about 25% return in an average of about 3 months, for an annualized ROI of about 100%.

For leveraged purchases, I generally see about 70% ROI for my portfolio loans (about 250-300% annualized) and an infinite return on my purchases where I use private investors (since they will lend 100% of the purchase, rehab and holding costs).

J Scott · Answer

Actually, in most cases this probably isn't true. While the ROI on the investment might be higher, your overall ROI including your time investment is likely MUCH lower.

To average things out, if you're going to be doing much of the work yourself, you should assign yourself an hourly wage (how much are you worth?) and then subtract out the bulk sum of what you would have earned from the profits.  THEN determine your ROI on the investment.

Gregory Childs · Answer

In 2010 we averaged just under 28%. We use our own cash, so we don't have any financing costs to contend with in our ROI.
In this market, I believe you need to project a 30% return to even consider a deal - that way if things go wrong (as they sometomes do with the best of planning) you can still come out smelling good.
First rule  - don't lose money. Second rule - buy correctly or don't buy at all.
Saying all that, we did lose on one deal in AZ last year - but that had to do with lousy timing and not necessarily bad business practice.
We don't have any magic formula, we just look at a lot of deals before we move and keep to our budgets once we're in. Works for us.

TTFN,

Greg

Danny Johnson · Answer

I agree with J about the lower ROI (including your time) when doing the work yourself.

Unless you really just want to do the work because you enjoy, you really shouldn't.  Think of all of the marketing, offer making, deal closing you can do during the time that you are there patching cracks and washing paint out of your paint brushes.

You are probably going to be losing a lot more in opportunities.

But too each his own.  If people like doing the work, more power to them.  Whatever makes you happy.  I'm not trying to say it's wrong, just know what you might be missing.

Derrick Williams · Answer

I have alot to learn...I've only flipped 4 homes, but i havent had any trouble stayin over 20%

Kristine Pelonche · Answer

Yes, thank you! I need to be reaching a higher % of ROI with my next sale.

Hugh J. · Answer

Thanks for the great advise.  I can see how you are able to maintain a reasonable ROI by saving and doing most of the work yourself.

Jim Peck · Answer

I'm pretty much a cash on cash guy for my analysis.  If I layout $125-200k and get a profit of $25-75k I'm happy.  But then again, I do the work myself and I enjoy it so I gain everywhere :)

Sarah B. · Answer

Each investor I work with has different guidelines.  
One large investment group wants 15% minimum if the purchase price is below 225-250k. They buy around 5 houses weekly and flip them even quicker and do quite well at that %. This investor pays me incentive if I bring to the table properties over 20% ROI.

Another investor I work with doesn't look at his ROI %, he looks at his profit dollar amount per money spent. If he's making $20k on a 150k investment he's happy.

I have an investor who buys only higher price point houses in niche areas who will buy at 10%.

I think it really depends on your area and what's available.  There are some 35-50% deals here in Sac but they are far and few between and they move really quickly.

Average Flip ROI?

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