I am working on my first deal and have something really interesting on the table. Here are the specs:
2 bd/ 1 bth
1,050 sq ft
$143,000 asking price
This deal comes with pre-approved build plans and permits which will add square footage to make this a 3/2. It's quite a big undertaking for the first deal but knowing there are already plans drawn makes me want to consider it. We have an experienced contractor/family friend ready to tackle this. Comps are close to $300k and a property on the same block is currently being renovated (almost double the sq footage) will be listed close to $600k. Thoughts on taking this on as a newbie? Any advice?
here are my rough calcs:
You think the house needs 70K... so it needs 90K (trust me on this)
10% closing fees etc. etc.
143K +90K+30K= 263K expenses not counting cost of money lending)
Your profit will be $37K
Not enough for me personally.
If it really is 70K repairs, profit is around 50K... better but not a home run deal. But not bad either.
70K repairs I would say 3 to 4 month rehab. 50K in 3 to 4 months is not very amazing for our standards.
Keep in mind... if I sound negative... that is GOOD!
You NEED to be "negative" with your numbers and if they still come out OK, you have something there.
The numbers you posted seem way off to me. How many square feet do you plan to add in order to make it a 3/2? And what is the per foot build cost in your area? In my area, any new construction is going to run about $120/sf at minimum, so if you are adding on a master suite with a nice size bedroom and bathroom with a walk in closet you would be adding about 500 sq ft. At $120 per foot that equates to $60,000 just for the addition.
To completely renovate the rest of the house it would run about $55/sf in my area, which equates to 1050sf x $55/sf = $57,750. That puts the total cost at almost $120,000 and doesn't account for any holding costs.
Hey Jerryll, thanks so much for your breakdown here! I definitely agree, cautiously optimistic is the way to go when it comes to rehabs.
Braden - thanks for your insight as well. I'm not sure the average per foot build cost (first time flipper here) but it looks like the site plans adding just over 200 sq ft. It's a narrow townhome but with that and using your numbers, that puts it at about $82k reno cost. Somewhat in between what I originally shared ($70k) and what Jerryll mentioned to bump to $90k. Great advice from you both and much appreciated!!
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