How to Calculate How Much to Flip a House
Key Takeaways:
1. Speed is crucial in real estate deals - develop a strong network and make quick, educated decisions.
2. Use a simple spreadsheet to calculate potential profits and make offers confidently.
3. Consider different funding sources, such as cash, loans, or partnerships, to finance the project.
4. Conduct due diligence by getting bids from contractors and estimating holding costs.
5. Adjust your offer based on potential profit margins and negotiate with the seller if necessary.
6. Utilize tools like Rentometer to determine rental potential and explore alternative strategies.
7. Practice analyzing deals and refining your calculations to improve your skills in real estate investing.
The 1-minute test!
Being able to see if how much a house would make as a how flip QUICKLY is important!
If it fits my minimum threshold, then it earned the right for me to do more digging, but I always start here.
It was important to have simple inputs and be able to give our agent/wholesaler answers quickly.
What's up guys and welcome to investing with about the Baldovino’s . My name is Josh, and on this channel, we are documenting our journey in real estate investing. So you want to follow along, make sure to subscribe. And today we're talking about how we locked up our first flip in under an hour. Also, this video is sponsored by Rentometer, but more on them later.
Firstly, what I'll say is speed kills all deals. And yes, it gets easier as you get as you develop your relationship with your agents with wholesalers with your network. Now, the first tip off the gate is your network is extremely important. And the next thing is with your network, make sure that you are making decisions about whatever they're sending you as educated and as quickly as possible. So this story time is our agent sent us over a potential flip property that he was actually also the seller agent for and so this was somewhat of a pocket listing. But he did put on the MLS and said, Hey, this could be a good fit. We've done five deals with him in the past year. And so he knew exactly what we were looking for. He knew our funding sources, all of that good stuff, he knew that we were good buyers. So the last thing to note about that is that I know it is impossible to understand the full story, but just make sure that you're able to try and get as much information as possible and then move.
On this video, I'm showing you how we're able to calculate and understand how much we could potentially make from a flip and would also gave us the ability to make an offer quickly and confidently share the spreadsheet that's linked down below with us that you can figure out and calculate your next flip quickly. Okay, so this is the spreadsheet here made it very simple. The goal is, can we get to a place where we can get an offer, and or lock it up under contract before being able to do some due diligence. As an out of state investor myself, I always make sure that we have the inspection contingency in there that we have seven to 10 days for us to do some fact finding and our due diligence. But for now, the goal is hey, can we lock this up quickly, the property was listed at $85,000. And if you need to figure out what the ARV or after repair value is, I have another video that breaks that down link down below. But for now, the real quick thing is when I asked the agent what he thought I ran ARV quickly. And in this case, we thought that the ARV would be about $250,000. Now, for the rehab amount, ask your agent. Hopefully they're investor friendly, and they're able to ballpark for you. And then the next thing you should do, right is, as you're doing your due diligence, pay three contractors to walk the property and give you a bid of what they think it would cost to hit your ARV spend the money if you're going to spend who knows what on this project, spend a couple 100 bucks just to make sure that your bids are as close to as realistic as possible.
But I will say you don't always have the luxury when you're in the Quick offer stages of the trial to lock up within 24 hours. Sometimes you can't get a contractor out there. So we said hey, what happens if we had to spend 100,000 on rehab, this was a complete gut job, by the way. So off the bat, right? If we had the cash ourselves, we would buy it for 85. Put it 100 into rehab. And then if it's over 250, right, we could potentially make $40,000 a dish. You know, the next question that I get, or I try and figure out is okay, how are we going to fund this deal. And there are so many different funding sources that you can pick from. If you have your own cash, you can do that. But you can also potentially borrow the money either from yourself in a HELOC with a bank. Or you can use hard money loans you can use private lenders, you can partner with someone you can get business credit, there's I don't know so many different ways.
What I did is I did put an interest inside here. So for this example, we are using private lender, and we're giving them 10% annualized. Hope not 1,000% and be crazy, huh? What's that some down below? And we're just gonna say for Worst case scenario, the project takes eight months. I don't think it's going to take that long, but it's better to just overestimate than not, right? So now at this point, it says, Hey, that we're gonna give someone they're gonna lend us the entire purchase, purchase price plus rehab at $185,000. We're gonna give them after eight months 12 grand, basically. And from here, our profit is $27,000. Now, is that worth the work for you? That's when you determine, hey, there's enough spread there. What if rehabs more? What if it's less? At this point?
The property was listed at $85,000. And I said, I would want a little bit more spread there. Can we get it locked up for $75,000 and make almost $40,000. Now that looks more enticing to me. And that's exactly what we did. I use this profit calculator and I said to my agent, hey, we really liked this deal. But one, if rehabs a little bit more than $100,000 then We're not making that much spread. The second thing is, we just want to make more money. You know, we have private lenders in place, we can go ahead and get this locked up quickly. But I wanted that 75. And he contacted the seller. And he knew that we were strong buyers, because we've done deals with him before. So he got it locked up for us out and $75,000. And so now we have a flip project. So real quick, let's pause.
And can I say thank you to our sponsor of this video, my first sponsor ever and that's Rentometer. If you didn't want to flip this property and say you wanted to keep it for a rental rent software makes it super easy to figure out how much this property could rent for, all you have to do is copy the address and put it into their system, press enter and it'll tell you exactly how much it could rent for. So if you want to avoid the capital gains of the flip, and said you want to rent it out for maybe I don't know additional tax benefits, then make sure you check out Rentometer if you click the link down below, you'll get an extended free trial and big thank you to Rentometer for being my first channel sponsor.
Now guys, back to the video. Some things about this calculator, just so you understand. And I tried to make it as simple as possible. Because again, the goal is can you make a decision fast? Someone texted you about an offer? Can you find ARV? Can you figure out you know what potential lending sources you have? And then just do some quick calculations and be able to get an answer for them as fast as possible. Because again, speed kills all deals. So if rehab ends up being $120,000 and profiting 17,000, is that worth it for you? I don't know if that's your decision to make. But at least you can see, see, for example, it was listed at $100,000 Oops, you need one more zero there, then you're losing 10 grand, and that's no deal. You walk away. Sorry, Agent wholesaler, there's not enough spread for me. The last things that are kind of baked into this. So your interest gets pulled from, you know, from this side over here, your total loan amount is I just did this based off of what your purchase your rehab and interest is, again, this is very simple, complicated. Calculations. Again, speed, speed, speed, speed, speed. Real quick, if you enjoyed this video, can you just comment below, speed, speed, speed, speed, speed, I want to know if you got to this point, I want to know if you find this valuable. And that just it's fun for me. And I was like why are you commenting speed down below. Anyways, back to this. Okay. The next thing, I made some assumptions here. And yes, again, assumptions, assumptions as close to it as possible if I can get 90% of the information in 30 minutes, and then work on a week to get the rest. And that's what I net.
So from here, I said, Okay, let's just say it's 300 bucks a month and holding costs, that means your property taxes, your insurance and utilities. Again, this is going to vary depending on your area, if your property taxes are expensive, I bumped it up a little bit more, maybe you change this to like 350 a month, I don't know, $400 a month, or maybe your insurance is crazy, I'm not sure. But that's my quick assumptions. And then actually, I'm going to change this, this is not this is just holding cost period. Because this is then multiplying by the amount of months that you expect the project to go for. And then your closing costs are things that you can avoid. So it's your title fees, your agent, commissions, your city, county, all the other fluff things that end up in your closing HUDs that you don't know, the quick assumption is 9% of the total sale amount at the very end. That's how much you're going to put inside there. And so once you have these inputs all set, you can then figure out how much money to make. And it's fast. It's simple. You can make an offer you can give it to your agent to the wholesaler. I mean, I don't know if I would give this to them. But if you're working with your agent, and you want to be transparent, this is what I do. And that way they know like okay, they really have to be here because of this.
Okay, overall, again, I hope that you guys found value from this. These calculators these quick templates are honestly what has been making, figuring out and identifying deals much easier. Take this, run with it, develop it for yourself, and analyze more deals. The more things the more deals you practice, the better you'll get. Again, if you want to figure out how to calculate ARV that's also linked down below if you want to figure out hey, could I rent this out and also make this a burr instead, make sure to check out Rentometer again, thank you for sponsoring the channel. And if you found this helpful at all make sure to share this with anybody else you think would find value of it. These you know these table we're going to make the spreadsheet take a while, this video takes a while .
All that if you want to help me out and you just want to say thank you. Please just give a like it really helps the algorithm gives me a little butterflies inside because you're helping me out, and also make sure to subscribe. Thank you all so much. And I will see you guys on the next one.
