STEP 3
THE NUMBERS NEVER LIE
WE HAVE ALL SEEN THOSE T.V PROGRAMS THAT GLAMOURIZE FLIPPING.I WISH IT WAS SO EASY THAT EACH AND EVERY HOUSE THAT WAS PURCHASED WITH INTENT TO FLIP YIELDED SUCH A LARGE MARGIN. INVESTING REQUIRES LOTS OF DUE DILIGENCE DON'T BE FOOLED INTO THINKNG ITS FOR EVERYONE.
HERE'S THE INSIDE SCOOP ON THE NUMBERS AND WHAT YOU NEED TO KNOW. LETS TAKE A TYPICAL SINGLE FAMILY HOUSE THAT YOU FEEL MIGHT BE RIGHT FOR THE FLIP.I ALWAYS START WITH THE SELLOUT PRICE AND BACK OUT ALL THE OTHER COSTS TO OBTAIN MY ANTICIPATED NET .
HERE'S AN EXAMPLE :
ADDRESS:1313 MOCKINGBIRD LANE
SELLOUT: $350,000
PURCHASE PRICE:200,000
LEGAL FEES ON THE BUY;$1000
CLOSING COSTS(IF MORTGAGING):$10,000
IMPROVEMENTS:$50,000
BROKER FEES @ 6% $21,000 (ON THE SALE)
MIN. 6 MONTHS OF MORTGAGE PAYMENTS @ 7% INCLUDING PITI(PRINCIPAL/INTEREST/TAXES AND INSURANCE); $9800
LEGAL ON THE SALE:$1000
TRANSFER TAX(MAY NOT ALWAYS APPLY):$3600
MORTGAGE SAT .FEES AND TITLE CLOSER:$250.
NET EARNINGS ON 1313 MOCKINGBIRD LANE WOULD BE :$53,350
IN A PERFECT SCENARIO WHERE YOU COULD PURCHASE A HOME ,HAVE THE IMPROVEMENTS COMPLETED IN A TIMELY MANNER(IN BUDGET), AND BE OUT IN 6 MONTHS,THE HOUSE WOULD LEAVE YOU A NICE MARGIN OF $50K PLUS.IT DOESNT ALWAYS WORK THAT WAY. ALLOW YOURSELF A CUSHION OF AN ADDITIONAL 3 MONTHS PAYMENTS AND A 5% INCREASED COST FACTOR ON IMPROVEMENTS. PRIOR TO TAKING THAT STEP TOWARDS FLIPPING,BE SURE YOUR FINANCES ARE IN LINE AND THAT YOU ARE ABLE TO SUSTAIN A CHANGING MARKET. ASK YOURSELF, IF THE HOUSE DOESN'T SELL CAN I RENT THE HOUSE. WILL IT COVER MY MONTHLY EXPENSES?
REGARDS,RON MOLCHO ..MANAGING BROKER @ AMERICAN HOMES OF SI 718-981-3400
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