As you know, each week I’m out seeing dozens of properties and always looking for great opportunities. Many people say that in today’s market there are no “flipping” opportunities to be had — well I’m here to show you that I’ve found one.
There is an Eichler townhome complex in Santa Clara that recently has seen many units turnover so we know pretty accurately what buyers are willing to pay in this market (very valid comparable sales). One now Pending was listed at $489k and sold in 10 days so let’s assume that’s where it closes. The Flip unit I propose is listed at $405k but it’s been on the market for 200 days so we know that must be too high (and it needs some major work that may scare most DIY homeowners. I’m assuming we can get in at $360k.
Here is my quick take on the math:
Purchase price: $360,000
Cash down: $ 90,000
Cash for rehab: $ 50,000
Holding costs: $ 6,500
Cost of sale: $ 30,000
Sale price: $489,000
Profit: $ 43,000
Cash on Cash: ~30%
Duration: 3 months total
By my calculation, for a 3 month investment of $146k, the projected return would be $42k. Several sales support this sales price if not higher providing the rehab selections are done well.
1) Obtaining reasonable financing so carrying costs are within budget
2) Completing the project and back on-market within 6 weeks; 4-6 week escrow for sale to new buyer
3) Keeping rehab materials and contractor on budget of $50k
4) Overall market risks of price and financing fluctuations
Who wants to give it a try?