# House #18: Flip Analysis

September 9, 2010 · 4 comments

In my last post, I provided a detailed financial analysis of what we could expect if we were to hold The Haggle House as a rental. In this post, I want to do a quick financial analysis of what our profits would look like if we were to rehab/flip it instead…

If you recall The Flip Formula that I often refer to, the formula for determining estimated profits on a flip would be (assuming I rearrange the formula correctly):

Profit = Sales Price â€“ Purchase Price â€“ Fixed Costs â€“ Rehab Costs

We estimate that we should be able to sell this property for between \$75,000 – \$80,000.

Our Purchase Price on this property is \$43,500.

Our Rehab Costs are estimated at \$6,500.

Our Fixed Costs are along the lines of the following:

Our profit on a \$75,000 sale would be:

Profit = \$75,000 – \$43,500 – \$8,500 – \$6,500 = \$16,500

And our profit on an \$80,000 sale would be:

Profit = \$80,000 – \$43,500 – \$8,500 – \$6,500 = \$21,500

So, we could realistically expect profits in the \$16-22K range…

That’s pretty much what we’d expect from a property that requires very little work (about 3 days of rehab). If we could generate greater profits than that, it would probably be a slam dunk flip. And if we couldn’t even generate that minimum profit, it would probably be a slam dunk rental. But, with profits in that range, it’s actually a difficult decision…

I’ll post some additional financial analysis in an upcoming post that will hopefully give a better perspective on flip vs rental, given the numbers we have so far…

### 4 responses to “House #18: Flip Analysis”

1. ezra says:

Hey,

I think you should consult with Brangelina. Cuz it’s looks like they just bought a \$40mil lemon! Check it out, maybe you can blog about it!

2. […] Analyzing A Fix And Flip Deal: How To Do It Posted by: claire | Category: Flipping Houses, Real Estate Investing, Rehabbing Houses […]

3. Bill (FL) says:

Do you self-insure properties in this price range? I’m thinking of doing that on properties under \$50K where I’m using my own cash.

4. J Scott says:

Hi Bill –

Yes, for properties that I’m rehabbing without any financing, I self-insure. If I get a loan during the rehab portion of the project, my lender requires insurance. And, of course, once the house is rehabbed and rented (if I hold it as a rental), I keep a Landlord Policy…