Flipping a house is not for the faint of heart. It requires a good amount of legwork and planning before the first hammer is lifted.
Clients often ask us what we look for when evaluating a deal. It basically comes down to one thing—the numbers have to make sense. At the end of the day, there should be enough profit left after all expenses are paid to adequately compensate everyone involved. You may be surprised to know that, here at NavCap, we pass up more deals than we accept.
So, our best advice to you is to take a good hard look at all of the costs involved in purchasing and renovating the house in question. Compare the total cost with the adjusted repair value (ARV) of the property and see if there is enough profit to make the entire endeavor worth your considerable time and effort.
But how do you calculate a solid ARV?
Run Some Numbers To Find The ARV
Well, hopefully, you’ve done your homework and had a realtor perform a CMA (comparative market analysis) for the property under consideration. By comparing the recent sales prices of similar homes in nearby neighborhoods, a realtor can give you an idea of what the eventual sales price might be. That way you’ll have a good idea of what the ARV (after repair value) will be or, basically, the expected sales price of the renovated property.
Next, Put Together A Detailed Scope of Work
Money doesn’t grow on trees so you will need to know just how much it will cost to make the home salable. We recommend that you find a licensed contractor to walk the house with you and put together an itemized Scope of Work (SOW). It should include estimates for labor and materials by room or major category. Our free SOW template will give you an idea of where to start. Then take the ARV and back out the cost of repairs (as specified in the SOW) including a 15% contingency reserve for any unforeseen problems. This will allow you to figure out just how much to offer on the property and still turn a healthy profit.
Explore Financing Options
If the numbers are in your favor, then the next step is to get the house under contract. For that, you’ll need to secure financing. Traditional long-term mortgages generally don’t fill the bill so you’ll likely be in the market for a short-term asset-backed commercial loan. That’s where Navigator Private Capital comes in. As a local private lender specializing in renovation financing, we are well positioned to help bring your next fix and flip to fruition.
Reach out to us at 443.603.0193 or at info@gonavcap.com to discuss the ins and outs of our flexible financing arrangements. To get the ball rolling, fill out the pre-application on our website or, if you already have the house under contract, go ahead and complete the full application to ensure fast approval.