All Forum Posts by: James Masotti

After Repair Value: $130,000

Closing Costs at time of purchase: $2929

Monthly Holding Costs: $1,370

Interest Payments: $570

Property Taxes: $620

Electricity: $50

Water: $30

Insurance $100

Number of months holding costs: 9

Total carrying costs: $21,889

Repairs $47,242 + 10% Contingency = $51,966

Commission to Realtor at time of Sale 7% - $9,100

Offer Price: $32,000

Potential Profit: $23,044

Hey guys...so far it's kind of been crickets on offers I've submitted for fix and flips. I know that a lot of people submit as many as 20 or 30 offers before they will get one accepted. REO's around here are ridiculously over priced here anyway...at least of course that's my opinion.

Anyway...here are the numbers on the deals I've looked at. All of the repair costs are estimates I've put together based on spending several hours at Lowe's and Home Depot getting material costs and using J Scott's book on Estimating Rehab Costs to ballpark the labor costs. I've bounced these numbers off my realtor, other local investors from my REIA, and two different contracts and they've said that they think I'm in the right ball park on these estimates. Let me know your thoughts so I can improve my deal analysis and submit stronger offers.

Each deal with have a separate post below this main one, to keep things a bit more organized and allow people to comment on specific deals.  Thanks again for everyone's feedback! Hopefully this will help me and other newbie's learn how to best submit our offers!

Some background on my financing too I suppose before moving forward with this...I am qualified for a HML at 4 points and 14.9% interest only for 12 months. However I have a private lender willing to fund up to on some of the costs at 10% interest on his loan value, for second position with no payments until closing (i.e. If I borrow $10k I owe him $1000 at the end whether I borrow for 3 months or 10 months), and I was recently qualified by a small local bank for a construction loan with 1 point and prime + 1% interest only for 6 months with an option to extend to 12. I also have some personal funds to contribute...so this all takes into account the best possible scenario I'm able to come up with for minimizing my holdings costs.

I guess my main question is...as a newbie...am I building in too much extra for into the "oh crap I really screwed this up and I'm totally going to lose my shirt" fund? Also the offer prices indicated are only starting offer prices and give me the ability to work my way up a bit if there's a counter offer. The rationale behind having such "large" potential profits...isn't that I'm greedy, but that I'm trying to budget for my screw ups...

However...I'm already factoring in 9 months to complete when I'm hoping it's really closer to 4-6 months. And I have a 10% buffer built into my repair costs. So do I really need an extra $5-10k (after expecting to come up on my offer price a bit) built into the profit as well? 

Thanks in advance for everyone's collective wisdom!

@Cal C. Thanks!

Sounds like it's pretty safe to say when someone says they are targeting no less than $20k profit for a flip then that they are most likely referring to gross profits

@Al Wilson and @Mark Brogan - Curious why yes on the logo and no on the picture would you mind elaborating more on your reasoning?

@J Scott - Awesome response. Unfortunately I can only vote it once.

@J Scott - I'm going to piggy back this topic - When you and other experienced rehabbers say you're targeting a certain profit...is that before or after paying income tax?

The BP Flipping Calculator doesn't have a spot to accommodate for income tax ...so in the example from @Tim G. above where he made a profit of $24,000...his real profit after paying the income tax (as well as the 15% self employment tax) would be closer to $16,500

Am I looking at this correctly?

@Ned Carey - That was along the lines of what I was thinking with the picture...like trying to send the message that I'm not out there to hoodwink you...I'm an actual person looking to solve your problem...I just don't know if the company logo would defeat part of that though? I'd rather be transparent...but that might scare of buyers from calling in the first place...

I guess that's why you say it all depends and to try them both and see what works.

@Chris Mason Great points on the glamor shot! I never thought of that because I don't really ever get post cards from realtors looking for listings.

For the flippers out there who do their own direct mail campaigns. Do you put your company logo and/or picture on your direct mail pieces so that recipients can build familiarity with your brand and that you're a real person? 

Branding is important to me on the sell side. Part of my longer term strategy is to over the next few years build up a good brand and relationship with brokers and home buyers in my farm area so that when a house I'm brining back to life hits the market, everyone wants to see it and put an offer on it

I guess I'm looking for guidance from those more experienced ...will having this same brand on my direct mail pieces be a positive or negative thing?

@Andrey Y. - My rental is in Delaware for all the reasons @Gregory H. mentioned. The people that I have seen make rentals work are those who are truly in it for the long haul and are paying cash for properties, or people buying multi-family of which there are not many and are the ones that are tend to be in less desirable areas.