Thoughts on my first rehab?

Question

I started out as a wholesaler in February and have since done 5 deals. I got an offer accepted recently and I figure it would be a good first rehab for me since its only cosmetic. Here are the numbers:

Purchase price: 65k plus I pay buyer closing :/

Repairs: 7k

ARV: 110k

Hard money loan will finance the entire purchase at 3 points and 11% interest. The points are going to be rolled to the back end but I will have to pay closing costs and repair cost out of pocket. Based on these numbers I'm seeing about 17k in profit assuming 6 months from close to close.

I'm waiting on CMA back from my agent to see if ARV could potentially be higher if I add a bathroom downstairs and or make the down stairs egress since its currently a non egress bedroom. So as it sits its a 3/1 with one bedroom non egress.

What do you think about the numbers and also what is your experience with making a downstairs bedroom egress to increase value

J Scott · Answer

In addition to David's concern about it only being a 3/1, my big concern would be your small rehab budget.  I don't see too many properties that only need $7K to bring them up to ARV.

Was this property publicly listed or an off-market deal?

Danny O'Bannon · Answer

All associated cost are accounted for. My contractor and I haven't dialed in all each cost but the 10k is what we figured. I'll have that Convo with him today. Thanks for the insite

J Scott · Answer

I'd be real concerned about adding a bathroom in a $10K budget!  I typically spend a minimum of $12-15K for just a cosmetic renovation with no reconfiguration.  And that's in Atlanta, in one of the least expensive markets...

Jacob A. · Answer

@Danny O'Bannon

Have you accounted for closing costs, realtor commissions, taxes, insurance, utilities, other holding costs?  You've just listed the profit and rehab budget and I just want to be sure you're factoring in all the "hidden" costs.  Looks like it could have potential if your ARV is accurate.  Good luck!

Danny O'Bannon · Answer

it's an off market deal. Landlord retiring and just cashing in. It really is a light rehab. Carpet, paint, counter tops, add a bathroom down stairs, add egress window, exterior paint is good but going to paint the trim, and tile flooring in the kitchen.

Danny O'Bannon · Answer

Thanks for the responses. I got the purchase price down to 58k. I'm now budgeting a 10k rehab and for sure adding a bathroom downstairs to make this a 3/2

David T. · Answer

Sounds doable if you can hold the line on it. My biggest concern for you is that it's a 3/1 which can be a pain to get rid of. Look to see if you can add even a half bathroom to bring it up. It might also add good value to it.

Financially, this is not a home run, but a great opportunity for you to work a flip first hand and gain invaluable experience. So, budget is the essence of your deal here and if you have any doubts about it, flip it now!

Good luck with it!

Thoughts on my first rehab?

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