Analyzing a Flip Deal in NE Texas

4 Replies

Hello,

This would be our 3rd flip, but I'm pretty conservative as we're still "newbies" so I thought I'd post the deal here and see what feedback I could get:

Pros:

- It's in a great area with a really good school district

- Decent size and layout (2100 sq ft. brick)

- Has 2 acres so we could sell the house and 1 acre and separate the other acre for more profit

- ARV $225,000

What it needs (or what doesn't it need):

-  The foundation estimate is roughly $20,0000 and with that will come plumbing issues. 

-  I'm guessing around $10,000 in plumbing repairs as it's on a slab foundation, most likely clay pipe and hasn't been used in a few years. We like to estimate conservatively (did I mention that already) and our last flip was about $8,000 in plumbing repairs.

-  The electrical doesn't have a grounding a wire so to rewire the house $10,000

-  New roof $10,000 (assuming it's on cedar shakes)

- The foundation issues are caused by large trees growing right beside/under the house so we'll need to remove them

-  As far as interior it's basically a gut job, but I think we could salvage the kitchen cabinets ($55,000).

- It's a foreclosure and the market is crazy so it'll likely sell between $65,000-$69,000.00 

Thoughts? Do you think there's enough room for $30,000 profit (with the potential of missing something or market dropping some)? Am I estimating way too conservatively or not conservative enough?

Thanks for any and all feedback!

Kathleen

I do wholesaling in the Dallas area and ran my numbers independently of what you said your pricing would be estimated at. I copied your foundation price but ran everything else based off of what I would expect a flipper to pay on a fully gutted house. My main question would be to what level are you "gutting" it. When I say gutted, I am usually referring to house like in Houston where they were flooded and we are doing insulation, sheetrock, and everything else. You could also gut it just down to the sheetrock except for maybe the bathroom in places. So depending on what you are referring to, I would say you are within the range for your estimates. If I were going bare bones and all the sheetrock then I would be looking more like $65-70k total work. But even with all of that, if you are buying it at 70k, putting 70k into it, and let's say 20k for closing costs (which I think would be high) you would still be walking away with 65k if you sell it at 225k. That's a slam dunk to me! If you buy it and then don't want it, I would take it off your hands and do it myself. 

I agree, this is a deal and if you end up passing on it, send it my way ;-)

I really appreciate the feedback. Unfortunately, they didn't accept our offer despite it being cash and a quick close. It's been under contract before and the buyers backed out so we'll see... As far as how much of a gut job it is - I can't say with a 100% certainty, but there was major water damage from roof leaks (the ceiling had fallen down in the kitchen).  We're in a rural area so it's difficult to find good licensed plumbers that are reasonably priced. Again, I really appreciate the feedback and it helps give me the confidence to do the next deal. 

@Dave Passey I'm curious what you ran your numbers at sense they were lower than mine?

@Kathleen Heine

I apologize, I did misread a little bit of your post. I did not put in any of the plumbing costs you had mentioned because for some reason I read it as you were including that 10k in the foundation 20k. Then from what you mentioned here about the roof stuff I added in a little bit more as well. I totaled it now at about 85k. Sorry I miss read that. Still a good deal though! I am basing my numbers off of being in the Dallas area and getting those prices. It would definitely be increased being further out. So that right there would be an increase. I calculate our numbers based off of what we have calculated from doing many deals and working out numbers working with our investors we work with and sell to. Most of the guys that we sell to have contractors in place and people that they work with regularly so their pricing is pretty set. It sounds like you would be looking for people to do the work while you are in it which will always raise the price as well. These together seem like they would probably account for most of the difference in price. 

Hopefully those other guys fall through and you can get it!

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