Good ROI for house flip?

Question

Hi BP Cleveland,

Wanted to know what are generally good returns on house flip? Also, here are the things that I'm factoring in the flip costs, please let me know if i'm missing anything:

• Purchase price
• Renovation costs
• Realtor fees
• Closing costs

Let me know when you get a chance. Thanks!

Bob Collett · Answer

@Jeffrey Boyce

I generally find that most investors do not really understand what ROI is, so you will hear them say things like I want a $15,000 return.

When I do a "flip", I target a 35% ROI, or 35% profit. I have generally found the actual profit on my deals to be higher, but I am extremely conservative, and I target 35%.  I would typically only do between one to three deals a year.

I find that many investors are happy with 21% or 22%, and instead go for volume often doing a dozen or more per year.

Whatever your required ROI, the cost basis should include total acquisition cost, total renovation cost, total holding costs (taxes, insurance, etc.), and total transaction costs (real estate agent fees, paid inspections, title costs, marketing costs, legal fees, etc).

I always use total purchase price and avoid the temptation to instead use cash invested (down payment), because if the deal goes poorly, you are on the hook for the entire purchase price. I totally ignore the idea of "COC Return".

You will probably find lots of interesting opinions here on BP.

Best of Luck

Bob

Jeffrey Boyce · Answer

Thanks so much @Bob Collett - yes, i was looking for ROI percentages so what you provided is great. Makes sense in all you indicated. The last point you mentioned I think is a great one as I wasn't sure which route to consider. Really appreciate the insight!

Account Closed · Answer

How about holding costs like utilities, prop taxes during rehab time?. House staging costs, survey and city permit costs (if any),  interest paid and orig points on the private money loans (if any), attorney fees (if any)