I need help with making sure our numbers are good. This is our first true non owner occupied flip... So here goes.
Forclosure Purchase price is $43,000
Conservative ARV biased on comps in the area of $85,000
Repair cost $9,780
Repairs include. New roof, carpet paint, flooring, windows, bathroom update, kitchen and a ton of cleaning and yard crap hull.
Holding costs are $205 a month
We will Pull an interest only loan of $55,000 at 5.5% for the first 6 months then it will be amortized at 15 year. At the same interest rate. With a 5 year ARM. Although we plan to sell in less than 6 months.
Loan costs will be about $3500 so we will get about $8,000 at closing to use for rehab funds.
Total expences are about $15,000 for a total of $58,000
Sellers commissions & closing. $7,400
Any thoughts? Constructive criticism would be great.
Are you sure you can put on a new roof, update kitchen and bathroom, put in new flooring, windows, carpet, and paint the house for under $10,000? How much is the new roof alone?
Your repair budget seems way too low... Roof, carpet, bathroom updates... I'm thinking more like 20k.
I got bids for the roof from a contractor at $2500 we will do the tear off ourselves. All the other work will be done by my wife and I. So those are just material costs.
I have done two small homes under $10,000 doing it myself including roof, but didn't replace windows.
At times I may wait until a super deal comes up on materials.
For example: I occasionally fish with someone who does carpet at times customer changes their mind after install and doesn't like color or whatever generally I get it free or may give him a few bucks for it if I need it ,and pay him to install if he's not busy.
it's new and works fine for rental
You are not valuing your time enough. For taking all that risk you should be making that $15000 if someone else does all the work. There is not enough to be made here unless you can get it for less than 30000
You can get all of the work you outlined done for less than 10k? I would imagine that means you are going to be doing all of the work yourself?
How long are you figuring the rehab to take? That is an important factor to consider as well.
Seems really low on the rehab budget, even doing a lot of the work yourself costs can really add up and start to eat into the small profit. How much is your time worth?
Thanks Everybody for your input!
It it helpful to see that even though this deal is purchased at 53% of the ARV we are still not making much money.
To be clear we are only replacing 2 small windows in the house. total of $400 with me doing all the work. The rest of the windows were replaced within the last 2 years and are nice.
Kitchen and bath updates just include paint and cleaning and some minor drywall patch/repair. I set aside $2000 for this even though it will most likely take less than $200
Wife and I Are good at doing flooring as we have done it on all 3 of our other properties, The floors are NASTY and I think will be a big part of the value add.
The biggest part is that the house cannot qualify for conventional financing in as is condition. It has had 2 offers on it and both have fallen through because of financing. but that was at a $60,000 purchase price.
backup option is that it will rent for $800 a month. Witch based off purchase price is almost a 2% rule.
We would then refinance it and go conventional 30 year.
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