Architect · Houston, TX · Member since 2016 · 81 posts · 25 votes
So I just made my first verbal offer on a potential flip. Then I realized I need to get others to look at my analysis! Would you take a look at this analysis below? I based on ARV from the MLS, and also a friend of mine recently bought a place nearby as well. Any input would be great! Thanks!
Sugar Land, TX · Member since 2016 · 69 posts · 79 votes
9y
Hi Greg, first things first, you said you did ARV from MLS, is this based on actual sold comps and current listings? Don't forget to do DOM in your calculations. Also check the flood zone which can increase your insurance premium.
On your numbers, I think I came across this deal which I received from one of the wholesalers, here is what I see:
1.What is your exit strategy, flip or buy and hold?
2.Rehab cost, this goes back to my question number one but have you actually walked the property? "Never" trust wholesalers rehab cost, even when you come up with your rehab budget add 10-15% contingency to it, if you don't end up using it, it's the icing on the cake but if you ended up needing it then its the difference between making it or breaking it.
3.purchase closing cost seems low, I would say around $4K-$4500 specially if you are buying from well known wholesalers in town.
4.Your holding cost seems high, unless you are financing the whole purchase with hard money. if it is hard money make sure to put enough holding period in your equation as first rehab may take longer if you don't have the right contractor in place.
5.selling closing cost should be around $4500-$5000 for the $250K
6.On agent, find one that will save you some money on percentage of commission but keep in mind you get what you pay for, don't use flat rate agents (this is just my opinion)
At the end make sure you do your numbers, also keep this in mind you can go to tons of guru classes and they will teach you how to do things in theory but until you do them in real world they worth nothing. You took a big step to make your offer.
Let me know if I can be any help and good luck with your project.
Sugar Land, TX · Member since 2016 · 69 posts · 79 votes
9y
Hi Greg, first things first, you said you did ARV from MLS, is this based on actual sold comps and current listings? Don't forget to do DOM in your calculations. Also check the flood zone which can increase your insurance premium.
On your numbers, I think I came across this deal which I received from one of the wholesalers, here is what I see:
1.What is your exit strategy, flip or buy and hold?
2.Rehab cost, this goes back to my question number one but have you actually walked the property? "Never" trust wholesalers rehab cost, even when you come up with your rehab budget add 10-15% contingency to it, if you don't end up using it, it's the icing on the cake but if you ended up needing it then its the difference between making it or breaking it.
3.purchase closing cost seems low, I would say around $4K-$4500 specially if you are buying from well known wholesalers in town.
4.Your holding cost seems high, unless you are financing the whole purchase with hard money. if it is hard money make sure to put enough holding period in your equation as first rehab may take longer if you don't have the right contractor in place.
5.selling closing cost should be around $4500-$5000 for the $250K
6.On agent, find one that will save you some money on percentage of commission but keep in mind you get what you pay for, don't use flat rate agents (this is just my opinion)
At the end make sure you do your numbers, also keep this in mind you can go to tons of guru classes and they will teach you how to do things in theory but until you do them in real world they worth nothing. You took a big step to make your offer.
Let me know if I can be any help and good luck with your project.
Investor and Home builder · Sugar Land, TX · Member since 2016 · 52 posts · 45 votes
9y
@Account Closed, looking at the comps, you should be able to get more than 250K if the flip is done right and by that I mean, spending money on things you need to make it stand out. This is exactly what we are doing at our real estate meet-ups in Sugar Land - newer investors bring their deals and we analyze as a group. The biggest wild card is the rehab since we have not seen any pictures.
Investor · Longwood, FL · Member since 2015 · 221 posts · 130 votes
9y
I guess you could make the offer then recalculate during a 10 day inspection period and renegotiate if needed. Here in Florida, a ten year old roof would probably be replaced to get top dollar. A shingle roof here for a 2000 sq ft house would be about 10k. My only siggestion is to calculate all of those items needing replacement where your report currently says n/a. Maybe you can do that during an inspection period. Consider the roof cost.
Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
9y
@Account Closed seems like the biggest risk here is the rehab cost, but there's no pictures of the inside, so it's hard to say if it's adequate in your situation. Have you seen the inside of this property yet?
Architect · Houston, TX · Member since 2016 · 81 posts · 25 votes
9y
Thanks all for the quick feedback! I love this community that genuinely likes to help!
@Kami S. Thanks for the encouragement BTW. 1. My exit strategy is to flip since I can't make the rental numbers work. As for a second exit strategy, I don't have one yet. Any suggestions?
Our rehab cost of $35k is higher than their $25k due to requiring 21 piers for the foundation at the back of the house. I estimated $400 per pier. But now I looked at it again, it's more like $42k with the 10% contingency.
3. Thanks for the input on closing costs and holding costs. Yes, I was planning for worst case of using hard money ($50k worth @ 12%).
4. @Scott Harper Thanks for the suggestion, I will most likely renegotiate now. That's if they call me back at all!
So it looks like the purchase price is now $125k with all y'all's input...
5. @Shaun Vembutty Have you done comps in this neighborhood before?
Investor and Home builder · Sugar Land, TX · Member since 2016 · 52 posts · 45 votes
9y
@Account Closed, I have not done comps in this neighborhood before but when I looked at the comps after reading your post, it seemed to indicate a higher sale price than what you were projecting if you spent the money on the right finishes. You can call me if needed. I am happy to help in giving you direction etc. since this is your first deal.
Architect · Houston, TX · Member since 2016 · 81 posts · 25 votes
9y
Sorry to just follow up on this: The house was sold for way higher than my offer, I suppose it was a buy and hold investor. Tough luck. @Shaun Vembutty thanks so much for offering to help! If you don't mind, I'll call you once I get a deal in play.