Potential Flip Deal...should I do it?

Question

Hi all!

Looking for insight:

Would you do this deal:

4bed/1.5 bath

Purchase price: 75k

Rehab: 75k

ARV: 220k

Hard money 9% +3 points

Up front Out of pocket cost: 21k

Holding cost (6months): 11k

Net profit: 17k

ROI: 53%

Brent Paul · Answer

Personally I think you are cutting it close and I would pass.  With the comps being such a wide range it really could go either way.  If this appraises for only 200 you will be at a loss.  What would be your backup plan if the house only appraised for 190k?  I hate to see people lose money on their first flip.  Always, Always have a backup plan.  And I recommend having a buffer of 10% above your repair costs for things that come up and believe me things will.  There is no way to know until you start tearing into things.

Eric M. · Answer

I don't like the sound of those comps. You really need to dig in on those and make proper adjustments. That's a wide range. 185 is not going to be good if that is an accurate comp. 240 would be awesome.

Not to mention that your list sounds like I am taking the over on 75K.

Ray Realdine · Answer

@Caleb Heimsoth

Thanks for your response!

No flips yet, but 2 rentals that both needed rehab work.

I have 4 comps that sold in the last 90 days that range between 185 - 240.

The house needs a ton of work. New kitchen, new baths, electrical work, paint, flooring, windows...the list goes on.

Caleb Heimsoth · Answer

@Ray Realdine. Need more info.  Have you don’t flips before? What’s in that scope of work? Do you have comps to support that ARV? Average days on market?