Calculating Profit on Rehab Transactions

We do a lot of hard money rehab lending here in California, and one thing that many clients have trouble with is calculating all the costs involved with their rehab project and figuring out what their profit potential is.

More seasoned investors have worked through enough transactions that they are able to calculate this, or they have created a spreadsheet to do it for them, but for the newer investors getting started, this can present more of a problem. After all, knowing your profit potential going into a deal is extremely important.

We've put together a nifty little calculator that will help calculate profit potential. It allows for all hard money loan costs, rehab costs, insurance, selling costs and hold time. In addition, it will calculate profit potential for just a hard money loan, or for a hard money loan in conjunction with gap financing.

For investors using gap financing, it also allows you to input multiple return calculations. This includes flat returns, annualized returns and participation returns. You can calculate for one, two or all three of these in conjunction with each other, allowing you to see at a glance where your costs are, and again giving you a total profit potential.

You can go here to check out our rehab profit calculator.

For those who are looking for hard money to finance a project, we are able to help with a wide variety of loans here in California. We do a lot of rehab loans, lending up to 65% of the after repair value. In addition, the loans we place do not require appraisals. Instead, the properties are comped, with our goal being to comp like properties.

Many times appraisers will take into account other distressed property sales when doing an ARV type of appraisal. This is legitimate as that is the market today, but for people fixing and flipping homes, that is not the target value. Our valuation looks for private party to private party sales as opposed to distressed sales on which we can then base a true after repair value.

For more information on our California hard money loan programs, visit our hard money lenders page. You can navigate using the left hand navigation to learn more about our different types of loans.