First Flip Advice

9 Replies

Hello! I'm not new to the forum but I'm new to flipping houses. 

Good news though, I have decided to flip my first house shortly and I wouldn't mind if you guys ran my numbers/ gave me some advise just to make sure I'm not doing this wrong. 


So here are the details I have so far. I am trying to flip a HomePath house where the renovation cost is included in the initial loan.

House info: 2 bed, 1 Bath, 800 sqft - Light renovation needed (floors, paint, clean up, maybe move a wall, some appliances)
House Cost - $43K
Renovation Cost ~ $15K (Max I can borrow for renovation)
Down Payment ~ $11K
Total loan ~ $47K


Looking to sell within 30 days of holding the property for around $75K (that is what the comps are going for)
Looking at a $12K to $18K profit {75K - (47K+11K) = 17K}

I don't have the exact loan details yet nor the exact renovation cost. I'm estimating $15K

Any advise or warning would be greatly appreciated. I'll try to keep this post updated with what is going on with our first flip.

Thanks!

Don't forget to factor in all of the holding costs of your loan. They'll eat up that $17K pretty quick!

Originally posted by @Matt Swartzendruber:

Don't forget to factor in all of the holding costs of your loan. They'll eat up that $17K pretty quick!

 I thought about that. If I can only hold it for under a month I hope those holding cost will be manageable. Estimating under 1K for 30 days

If you want to sell fast, price well below market.  Don't get greedy with flips.  Making $3K - $6K on each flip will keep you in the game and you build a reputation among buyers as the place they can get a good deal from.  That's the best way to build a solid reputation and buyer's list.  Buy, light fixing, then flip it immediately and move on to the next one.  Always aim to have another deal in process so you can avoid the "feast or famine" roller coaster ride most investors suffer from.  Hope this helps.

Originally posted by @Annette Hibbler:

If you want to sell fast, price well below market.  Don't get greedy with flips.  Making $3K - $6K on each flip will keep you in the game and you build a reputation among buyers as the place they can get a good deal from.  That's the best way to build a solid reputation and buyer's list.  Buy, light fixing, then flip it immediately and move on to the next one.  Always aim to have another deal in process so you can avoid the "feast or famine" roller coaster ride most investors suffer from.  Hope this helps.

 I totally agree. At $75K I think we would be a bargain but we are prepared to price it lower to sell quicker and create a buzz. Thanks for your response!

Update: I was pre-approved for a loan that exceeds what I believe will cover the mortgage and renovation cost yesterday.
Today is a walk through with my first contractor just to get a baseline on how much the renovation will cost and what to offer for the house.

Any contractor advice?

You may have the house ready to market in 30 days.  Then there is the time between when it goes on market and you have an accepted offer.  Next, the buyer needs to have his loan application approved.  That takes 45 days or longer.  I always budget 6 months on each project then I can be happy when I beat that time.

I also budget 7% to sell a house.  I assume that the buyer will ask for some-all of his closing costs.  I budget 3% for that.

When I run your scenario  through my calculation I don't see much or any profit.  I would not be buying.  Just my 2 cents worth.

Good Luck.  I wish you the best.

Bill

Do you know what the average time to sell a 2b/1ba 800sq/ft home in that area is? 
I think the time on the market especially for a 1 bath might take some time to sell. Unless of course, these types of homes are selling well in this neighborhood. 


@Bill Jacobsen  has some great points to look at. 

Bill - Thank you for your input. I wasn't thinking about cost of selling the house.

Joe - 2b/1ba 800sq/ft in my area are currently selling around $70k to $85K. $85k being completely redone with all the bells and whistles.

Originally posted by @Kwame Smith:

Looking to sell within 30 days of holding the property for around $75K (that is what the comps are going for)
Looking at a $12K to $18K profit {75K - (47K+11K) = 17K}

 I am not sure if you can sell within 30 days. I think Homepath requires you hold the property for atleast 90 days.

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