Updated almost 7 years ago on . Most recent reply
Cosmetic Flip Margins
Hey BP!
I am in the middle of my first BRRRR deal, and I think I've found a very low risk cosmetic flip in a nice high end suburb. Very low average days on market, definitely a desirable area to live, A to A- area.
My question is this: would you do this flip? Is this enough margin to account for the risk of getting into a flip?
3 bed 2.5 bath 2000sf 2 story vinyl home, 20 years old.
Purchase price: $150k
Potential rehab: $25k (paint, flooring, power wash, granite countertops for kitchen and 2.5 baths, convert loft to 4th bedroom). I think I’m way high on this estimate.
HML fees: 2 points, $275 application fee
HML funding: 90% of purchase plus rehab, up to 75% of ARV, at 9%, interest only payments, 12 month max term
Estimated total HML cost: $10,000
Commissions: $12000
Holding costs: $3000
ARV: $215-225k
Total profit: $15-25k
Thats 7.5% to 12.5% of total capital deployed ($200k).
But it’s $15/40 =37% to 25/40=62.5% return on my cash invested.
Help me decide!
Most Popular Reply
Personally, that doesn't work for my numbers but I am also in a totally different market. Working with private money lenders that fund 100% with upfront rehab money helps me much better than dealing with draw processes and fees etc.
A few points- Your HM estimate seems low. 180 days interest at $157500 loan amount is $7100. $3150 in origination as well. Your draw fees (~$150 per) and doc prep etc will probably push it closer to $13-14,000.
You'll need to have:
-$17,500 down payment
-$3150 origination
-$800-2500 closing costs (you didn't specify)
-$1500 utilities
-$10-15k upfront for your renovations (assuming it's a reimbursement deal)
Personally, $35,000 is a lot to have out on a deal at any one time, but ultimately it's all about your tolerance of risk. Build a 20% contingency into your budget in case your furnace craps out or your contractor decides to get squirrely