Deal Help - Are My Numbers Good?

[David Carrington]

Went under contract on Sunday on a 2 bed/1 bath in Derby, CT.

The numbers are as follows:

ARV $84,000

Rehab $10,000 (mainly cosmetic touches in kitchen/bath/paint/flooring)

Price $48,000 (includes $3k assignment fee)

Average rents for a 2 bedroom in the area $900-1000/month.

I'm trying to follow the 70% - Rehab - Fee formula. Is this too small of a flip for an investor or not enough profit on a deal?

[Account Closed]

I'd do that deal in a heart beat if I was sure of the ARV and it was in my market. Have you talked to an agent about the neighborhood, the amenities of this particular property, days on the market, how 2BDRs are selling? Lots of beginners focus on acquisition and repair costs. IMO easily half of the formula is knowing how it will sell in your market. If you don't know which properties are selling better than others, if you aren't watching comps every day, then you're just hoping and praying on the re-sale. I'm pretty good with comps and ARV but things are better for me since I started consulting with my agents early on.

Rehab resales are very market specific. Many threads here on BP will make it sound like the formula is the thing. But if you're in a rural area or hood with a limited buyer pool, in a flood plain with no available insurance, or if you're selling a condo in an HOA not FHA certified, the formula won't make much difference if you have no buyers. If you read the long thread started here by Justin Williams about doing 150 deals this year, you'll see that in So Cal he's doing margins that don't have anything to do with that 70% formula. He's up to 55 rehab resales so far this year and he's the first to say he wouldn't be doing very many deals if used that 70% formula. The competition is huge so his deals are thinner. But he's in a market where almost anything sells, so he can rely on volume. I never use that formula either. I plug in real numbers based on my exit options.

I suggesting getting some agent input for your market.