How do you figure out all your costs when flipping houses?
There are two ways that I believe are essential to you winning the deal and making a profit at the end.
The first way is napkin numbers. Napkin numbers are numbers you scribble down on a napkin quickly to figure out if something is a good deal or not.
Good deals are bought fast and so you must do your numbers fast:
Generally, flipping houses as the professionals do it, follows this formula:
Your ARV (after repair value) is 100 cents on the dollar.
You need to buy at 40 to 60 cents on the dollar
Fix to 70 cents on the dollar
Sell at 100 cents on the dollar
Cost to sell is 10 cents on the dollar
Net profit 20 cents on the dollar
After financing you may net anywhere from 10-15 cents on the dollar if everything is done right.
So lets say you have a house that you can flip for $200,000 that’s 100% of ARV
You buy for $100,000
Fix for $40,000 (kitchen, bath, flooring, paint)
Sell at $200,000
Cost to sell is $20,000 (realtors, discounts, staging, utilities, taxes, closing costs, lawyers etc.)
Then pay your financing $10,000 to $20,000 depending on your cost of borrowing (typically 8%-18% with hard money lenders)
Your net profit should be $20,000 to $30,000 on that house.
The second way to do your numbers is with a robust Microsoft excel spreadsheet:
You can download a FREE calculator that will do the EXACT projected costs including all contingencies to figure out to the penny what your costs will be for any buy fix sell project. To get it, click here: HouseFlippingCalculator.com
Respect The Grind,