[Calc Review] Help me analyze this deal
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This would be my first BRRRR. Seller inherited the house after a death in the family. I already offered 50k cash, + closing costs + brokers 3% commission. The offer was made prior to being listed. The seller declined because she has to split the inheritance 3 ways, and wants to see how the week goes with showings after being listed. I believe that the will be listing for around 75k-80k, which I think is too high with what all needs done, but quite possible for someone who wants to slowly make improvements on their own gradually. It's possible she comes back to reconsider my first offer.
I believe the ARV is accurate but I can't be positive. At first I thought it to be conservative, but the sq footage of the house says only 672sq ft. I also over estimated costs, since this will be my first BRRRR and I have never flipped a home.
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#5 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
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#5 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
@Jake Lilly, from personal experience, I find most risk to cash flow and profitability in real estate comes Capex items.
I approach it like this: everything needs replaced at some point. Kitchens need remodeled every 10-15 years to maintain high rents, roofs go bad, HVAC, water heaters, etc. 5% will likely not be enough to cover these items when they come up.
Regarding a flip, I am not sure it is a great flip. You have a potential of about $20k profit. You are likely looking at 7k (6% of $115k) in commissions if you list with an agent, buyers in this price point often want closing cost help, so that's another 2-4k. There will probably be overages in the rehab and inspection items that will cost you money. If your rehab budget is correct, I see this making 5-8k at the end of the day. The last flip I was able to complete for about $40k rehab was in 2015, and labor and materials have only risen since then. For me to take on a flip, with the risks and time commitment, I want to see at least a 50k spread.