My First Deal

7 Replies

I've been working with a wholesaler in my area trying to analyze this deal, but I want someone to take a second look. Preferably someone with a few flips under their belt to see if I'm running these numbers right. I will be using a Hard Money Lender 70%ARV @ 14% interest. Please point out anything i might be missing very nervous for my first flip! Thank You so much I appreciate anyone help!

Profit Calculator Chart
ARV $160,000.00 ARV $160,000.00
Purchase Price $96,000.00 LTV 70.00%
Purchase Closing Cost $2,000.00 Cost $138,320.00
4 pts
$5,320.00 Down Payment $26,320.00
Rehab $35,000.00
Carrying Costs $8,454.93
Utilities $500.00
Prop. Insurance $700.00
Prop. Tax $800.00
Association Fees
Interest $6,454.93

Sale Closing Cost $6,400.00

Title Insurance $800.00

Recording Fee $200.00

Closing Fee $200.00

Buyers Closing Cost $2,000.00

Commission 3% $3,200.00

Total $12,145.07

-Capital Gains Tax 35% $4,250.77

Profit $7,894.29

ROI
Invested $26,320.00
Profit $7,894.29
Return 29.99%

TX Agent # 0656542

Profit Calculator Chart
ARV $160,000.00
Purchase Price $96,000.00
Purchase Closing Cost $2,000.00
Points 4 $5,320.00
Rehab $35,000.00
Carrying Costs $8,454.93
Utilities $500.00
Prop. Insurance $700.00
Prop. Tax $800.00
Association Fees
Interest $6,454.93
Sale Closing Cost $6,400.00
Title Insurance $800.00
Recording Fee $200.00
Closing Fee $200.00
Buyers Closing Cost $2,000.00
Commission 3% $3,200.00
Total $12,145.07
-Capital Gains Tax $4,250.77
Profit $7,894.29
ROI
Invested $26,320.00
Profit $7,894.29
Return 29.99%

TX Agent # 0656542

Hi Leo, I'm still learning too but shouldn't this be:

ARV $160,000 x .70 = $112,000 - $35,000 Rehab costs = $77,000

Seems like you should be getting this property for around $77K to make it worthwhile.

Just my .02 cents...

@Leo Lanza I think the estimated profit is too thin at $7,800 if this is your first deal. 30% returns look great on paper, but you are putting a ton of money at risk to achieve this. And time! The most decisive factors are the accuracy of your rehab estimate and ARV. If you have been extremely conservative in those estimates, and if you believe there is significant upside potential to ARV, then I might consider it. Comments:

Why is the sale commission only 3%? Do you plan to sell it yourself?

Looks like your assumptions are based on a short holding period of 3-4 months.  This is your first deal...what happens if there are delays and you have to eat holding costs for an extra 2-3 months?

Again, I think your success will depend on the accuracy of the rehab estimate and final sale price. I recommend finding someone local to check your numbers (no one affiliated with the wholesaler or the HML, for obvious reasons).

Good luck!

@Leo Lanza, sorry to tell you, but you're not even close with these numbers. Without beatng you up further, just find yourself another deal - with at least $30k profit showing on it - and they are out there. You make your own deals in this business.

Best of luck with it.

The property would be purchased 60% off market value, so their should be plenty of room for profit, but I agree the profit from my calculation is far to thin! The rehab estimate is from a contractor bid. Does it look like it's the rehab making the profit to thin or have i miss calculated on the closing cost, carrying cost, financing cost etc?

TX Agent # 0656542

I'm just starting too... but I have to agree with Brian Huber sticking to the 70% ARV rule. The important part being to subtract the renovation costs from the 70% ARV, making a purchase price of $77,000 OR LESS worth a serious investment possibility. "Make your profit when you buy."

Oh i gotcha that just clicked for me! Thank you! I hadn't been subtracting the repairs for 70%!

TX Agent # 0656542