Quick question about how to calculate the seemingly magic threshold % for evaluating a flip:
If I want to calculate: Purchase_Price/(After_Renovation_Value – Renovation_Costs)
Do I use the net or the gross purchase and selling prices? I.e. do I net out the broker’s commission, inspections, staging, etc. in these numbers, or do I use the gross purchase and sales price? I’m guessing I use the gross numbers, but I’m not sure…
Second question, what is a reasonable threshold for your market? I’ve seen 65-70% on other sites, but that does not seem reasonably attainable on the million dollar homes in the Bay Area. Maybe I’m just not looking hard enough…
Thanks, this is helpful. I’m actually pretty excited when I find something at 80%, but I’m still finding deals off of MLS. I’m quickly realizing this is not the way to go to consistently find acceptable deals, however…
4 posts, 2 voices
BayAreaREI.com writes, Sep 9, 2007: (7 posts)
Quick question about how to calculate the seemingly magic threshold % for evaluating a flip:
If I want to calculate: Purchase_Price/(After_Renovation_Value – Renovation_Costs)
Do I use the net or the gross purchase and selling prices? I.e. do I net out the broker’s commission, inspections, staging, etc. in these numbers, or do I use the gross purchase and sales price? I’m guessing I use the gross numbers, but I’m not sure…
Second question, what is a reasonable threshold for your market? I’ve seen 65-70% on other sites, but that does not seem reasonably attainable on the million dollar homes in the Bay Area. Maybe I’m just not looking hard enough…
Thanks, Josh
jrestates writes, Sep 9, 2007: (4 posts)
1. i use the gross, but i could be wrong. i think your safe as long as you use gross for both purchase and sale
2. on the peninsula i use 70-80% (for homes in the 700k – 1mil range)
BayAreaREI.com writes, Sep 10, 2007: (7 posts)
Thanks, this is helpful. I’m actually pretty excited when I find something at 80%, but I’m still finding deals off of MLS. I’m quickly realizing this is not the way to go to consistently find acceptable deals, however…
jrestates writes, Sep 10, 2007: (4 posts)
No Problem. As you do more flips, your contact list will grow and deals should start presenting themselves outside of MLS.