Nathan Payne runs three exit strategies on a $500K property using his deal calculator. A traditional flip yields minimal profit after repairs and financing. But buying as-is, spending $500-700 on cleanup, and selling in two months generates $86.6K profit in a hot market.
One of the biggest issues that wholesalers, real estate investors, flip fix and flippers have is understanding what is a good deal and what isn't a good deal and what they should take down and fix and flip. Check it out. I have a video right here that explains how to use the calculator that I personally use to analyze deals. I know it'll help you check it out.
So the first thing you have to do if you want to be a serious real estate investor is have a calculator that calculates hard money, interest, closing costs, hold time, your commissions when you list it and you resell the property. So on this deal, the first thing we did is we were like, okay, what would it look like if we flipped it? How much money would we make if we flip this property? So I'll show you how to use this calculator. And again, you know, you need one like this. So if you don't have one, you can, you know, look in the comments, the description below, and I'll add, have a free link to get this calculator I'm using that we use in our business. So first thing you want to do is determine the ARV of the property and what it's worth when it's in pristine condition, when it's fully flipped. So this house is worth $500,000. $400,000 fully flipped. That's what we believe it was worth from running our comps. We got it for $344,000. So we know if we flipped it, we'd have to get hard money, 12% interest, 2% points to borrow the money. We'd have to bring 15% down to get the hard money. The whole time would probably be about 6 months. And usually it costs 3%, um, for commissions, um, to list it and 3%, uh, for buyers' commissions. But we actually have an in, and I'll show you that later. But that's usually what flippers have to pay. Now we had some contractors come in and they bid us $80,000 to $100,000 to flip the house in order to get it to its ARV of $500,000. So I just go right in the middle, just for an example. And usually if they bid you $80,000 to $100,000, it's usually gonna be more expensive than that. It's never really a lot less. So if you look at these numbers, you'd say, okay, look, that flip doesn't really make sense. You know, we're gonna spend $90,000 to make $8,766, not a good deal. Now what we do is we have an agent that lists it for $1,000. So we zero this out and we just add $1,000 to the repair costs over here. And that's, you know, you can see you can make a little bit more money. And also, you know, we, instead of put, let the pay 3% of the buyer's commission, we do 2.5%. So you would actually, for us, we would've made $25,000 by flipping this property. But for me, I was like, no, we can make way more on a deal this discounted in such a hot market. So we said, we're not going to flip this thing. So next thing he says, what if we wholesale it? You know, just get it done, get it quick. So we said, if we wholesale it, we first thought we could make $420,000 on the wholesale deal. And in order to check the wholesale, numbers on this calculator, you have to zero out your repair costs and you have to zero out the cost of borrowing the money since you're just selling it straight up. So if we had been able to find a buyer that was willing, a fix and flipper that was willing to take it at $420,000, we would've said, "Yeah, definitely. That's probably a good deal." But the buyers are coming out and the fix and flippers are like, "Yeah, you know what? I think we need this thing at $380,000, $390,000." So even at $390,000, we're talking what? $42,000, which is a good deal. But I said to my guys and we decided we can make more than that. So I said, "What if we wholesale it? What if we just buy it, close on it with hard money, and then just relist it as is?" So we ran comps and we said, homes selling in as-is condition in this area with similar condition are going for $450,000. So we said, "Okay. Well, we're going to maybe have to do a little bit work. We're going to have to clean it up." So I think we spent $500 on the cleanup and the cleaning lady, I think actually $700, and we would have to borrow hard money, 12%, 2 points to use the money, 15%, bring 50% down. We thought that The whole time we would take us 3 months to sell this thing. Remember our guy Nate, Nate Worthen, shout out Nate Worthen, our agent. He only charges $1,000 to list a property. So we didn't have to do that. And we did the buyer's commission for $2,500. So we were like, hey, instead of making $22,000 on flipping this thing, instead of wholesaling it for $42,000, let's shoot to make $74,000. So what ended up happening is buyers came in, there's a bidding war. We actually ended up getting $460,000 for the property. And the whole time was actually only 2 months and everything else rang true. We got the the interest and the hard money was at the whole time too, 15% down. And we had an agent that we only had to pay 2.5%. We had closing costs still, and we ended up making $86,600 and something. And so it's pretty spot on. So as you can see, wholesaling right now is the play in my opinion in hot markets because inventory's low and people are okay with buying properties that aren't fixed up because they want to get into a house. So I'm so glad we did this strategy because the other strategies we would've made money, but not as as much. So what you guys need to do is look at your options, your exit strategies on what's going to make you the most money and do that. And you're going to succeed and make more money in this industry. But that was the breakdown. The calculator is super helpful, and this is how we analyzed our deal.
So if you thought that video was helpful, like and subscribe for more content like this, and I'll keep it coming your way.
Mm.
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