Today I want to show you an important tool that we use to calculate out a bid for a property. We do this with every property we’re considering, and if the numbers don’t add up, then we walk away. And when I say, “make the numbers work”, I am referring to creating a quality home that has at least 10% to 20% profit for our Private Money Lenders. However the property I’m showing you today is one that we’re taking on.
We call this tool the Deal Analyzer because with it, we carefully scrutinize every phase of the deal and eliminate surprises while ensuring that we’ll realize better than market returns.
This is a house in Alameda. This property has great potential at first glance, and when we ran it through the Deal Analyzer to make sure we’re going to reach our profit margins before we bid, we confirmed that this one would be a winner. Follow along as I break this down for you, so you can see for yourself that if you’re an investor, you will want in.
Our property is a 2500 sq. ft home that includes a large yard, a pool and is located in a desirable neighborhood.
Let’s take a deeper look at the Property values and pricing. The estimated repair costs are $135,905, and we’ll be putting it back on the market for $1,850,000 after having purchased it below its current market value of $1,400,000. That’s healthy, especially when you see that we’ll only be holding this property for four months.
As you can imagine, our private money lenders love these short term investments with a high profit margin. But there’s more to see before we arrive at the actual profit, so let’s continue.
This next section covers the financing costs, and this is where the road meets the pavement. If we didn’t have the right numbers in this section, we would have walked away. Our total financing costs are $43,078 and our Total Selling transaction Costs are $120,675. We are happy with this. Remember we’re buying this property for $1.375 million with the plan to sell it for $1.85 million.
I should take a moment to note that as you can see, we put a lot of homework into the purchase of the property. We never go into any deal without all the information. There are no surprises.
The final section of the Deal Analyzer shows us our Total Estimated Net Profit and ROI. On the left, you see the estimated net profit. On the right, you’ll see the estimated ROI.
You’ll notice that I yellow highlighted the Total Holding Costs row on the left. This is critical to anybody who is flipping houses: You will eat up your profits if you don’t stay without your holding window time frame. Those will go up each month you are beyond your estimate and there goes the profit and ROI. This is why having top quality, dedicated and reliable people on your team is so critical!
As you can see, we’re estimating a net profit of $168,122 with an ROI of 10%. Our next step will be to place the offer. If it’s accepted, then we’ll start working on Jackson St. If it’s not accepted, then we’ll file this away and look for a different project. We don’t get hung up on a property deal, we don’t get emotional. This is a business and there are always deals out there!
Interested? We have an immediate opportunity right now on this property to make our investors a 10% ROI with $168,000 profit. Looking for $50,000 to $200,000 in gap funds. Ask about our partnership program and how you can increase your returns on your investments.
Just grab a spot on my calendar, and we’ll talk! https://reihomesandadu.com/appt/gary-massari/