Flip Formula

I am getting ready to make an offer on my first foreclosure. Could someone please give me the formula they use in calculating the profit they will make from their flip.

Thanks in advance ~

Comments(10)

  • NewKidinTown226th July, 2005

    Profit = (Sale Price) - (Purchase price + rehab + holding costs + selling costs)

    Pretty straightforward, really. I suspect that you had a more specific question in mind though.

  • ejm426th July, 2005

    So it may look something like this:

    Purchase Price - 29,900
    Rehab costs 10,000
    Carrying Costs 1,200 (4months)
    Closing Costs b&s6,000
    sellers comis 3000
    TOTAL EXPENSE 50,100

    ARV = 60,000

    Profit = $9,900 Correct???

    I am not sure if I should include the price I am paying for the propert since I am including carrying costs since I will have a mortgage on the house??

  • monkfish26th July, 2005

    Yes, you include the purchase price, as well as mortgage/carrying costs.

    You should also include homeowners insurance.
    [addsig]

  • ejm426th July, 2005

    Why do I include the purchase price if the only money I have into the deal in the down payment and the closing costs as far as buying the house?

  • vguess9926th July, 2005

    because you need to reimburse the loan from the bank. You also have to reimburse yourself ( your deposit) before calculating your profit.

    If you have a prepayment penalty make sure to factor that in your cost. And dont forget your utilities. They might not be huge amounts but they will cost you.

  • monkfish26th July, 2005

    Because the purchase price, less your down payment, is money you borrowed from the bank (mortgage/deed of trust) to buy the home.
    [addsig]

  • NewKidinTown230th July, 2005

    Quote:TOTAL EXPENSE 50,100

    ARV = 60,000

    Profit = $9,900 Correct???Potential profit, yes. Your actual profit is determined by your actual sale price.

  • happyhome30th July, 2005

    Start by calling or going the county tax dept where the property is located. They will provide you with who they are sending the tax bill to. Follow up with this party.

    You can also obtain the tax parcel number, assessed value, when assessed, structure type, bedrooms, bathrooms, sales history, etc.

    If that county has these records online you can now learn how to obtain these records if you have some key information.

    Visit the propety on Sat morning. The neighbors may know quite a bit about who owns the property. One neighbor may even have the information you need as they may have been asked to keep an eye on the house.

  • ROBERTOP30th July, 2005

    [ Edited by ROBERTOP on Date 07/31/2005 ]

  • ROBERTOP30th July, 2005

    [ Edited by ROBERTOP on Date 07/31/2005 ]

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