Considering Time when Calculating Profit on Flip

[Stephen Quesnel]

Hi - I'm a new investor looking to do my first flip in Connecticut soon.

I was thinking about how most people calculate their Maximum Purchase Price by considering the ARV, Rehab Costs, and Desired Profit.

Many people choose a fixed number (or %) as their desired profit, such as $25,000. But, I think the amount of profit you desire should also be based on the amount of time spent working on that project.

For example:

House 1:  Needs major renovations

ARV: $250,000

         Rehab:   $50,000

         Potential Profit: $30,000

                        Estimated Hours: 500

House 2:  Needs basic cosmetic work

ARV: $150,000

         Rehab:  $15,000

    Potential Profit: $10,000

    Estimated Hours: 100

In this example, I'd prefer to buy house #2, even though it would make 1/3 of the profit. You could say that with House 1 you'd make $60/hr, but on House 2 you'd make $100/hr.

I know its hard to estimate the exact number of hours you will work, but still. This is especially important to people who invest part-time.

What do you guys think?

Does anybody else consider time?

Is their a common equation or 'rule' people shoot for? 

- Stephen

[Josh Bryant]

Buy low and sell higher!!

The money is made in the buy...if you want to work on your houses and get paid, then that $$ should be taken out of the estimated rehab budget.