Gut Job Fix and Flips

[Van Johnson]

What’s going on out there? I wanted to get some feedback and thoughts on a recent deal I have under contract. I’m an investor in the Central Arkansas market currently making my first flip happen. I believe I got a pretty good deal. Below you’ll see a brief summary of deal calculations.

2/1 single family 900sqft

Purchase price- $10,000 (originally $20k before negotiations)

Rehab- Cosmetic$18,000

Electrical- $2,000

Plumbing- $2,000

Porch Foundation- $7,500

Unexpected Misc - $5,000 = $34,500

ARV - $80,000

I'm currently working with an ARV lender giving me 65% LTV ($52k). Only cost at closing are around $6k and another $6k in carrying cost. What do you all think of this deal? Also any tips on the whole process (rehab, dealing with contractors, etc.) Thanks!

[Evan Polaski]

@Van Johnson, each market will have different costs, and your budget is hugely contingent on the true scope.  I recently rewired a 1,000 sq ft house with partially finished basement and my rewire was $5,000.  We added a second bath, but the plumbing was also $5,000ish.  Both were licensed contractors with all permits pulled.

But assuming your budget is accurate: from an ROI perspective I would say this is a good deal. What I look for is a roughly 25% profit margin and a minimum $30,000 net profit. The net profit amount is important, because a sewer line replacement will cost you $10-15k regardless of size of house, so I need that minimum cushion when things come up.