Rehab Profitability Analysis
May 13th 2011 Posted at Real Estate
Comments Off 
Losing money on rehab costs is the number one reason why many investors fail to prosper on their handyman specials. To avoid the same mistakes, you need to understand how to analyze your profitability to make sure your fixer upper is truly a gem and not a money pit. New investors are intimated by calculating rehab costs. A simple way to determine whether your rehab is profitable is to use a rehab calculator. You can find software downloads online. Excel spread sheets can also be used to calculate your costs.Getting Started So here is what you need to get started. Use a three part analysis. Best case scenario, worst case and realistic. Enter your purchase price. Next add in your purchase costs including purchase price, loan origination fee, appraisal costs, credit report, title insurance, escrow and recording f We Buy Houses ees and any other closing costs. Get estimates from three title companies. Total that up and that gives you the total property purchase costs. Next category is the price you expect to receive after flipping your home. Enter the three price ranges from high, low and median under each category. Enter your sales costs for real estate commissions, title fees and documentary stamp tax transfer fees and subtotal. Then add up your holding costs for taxes, insurance and utilities and sub-total. Now add up your rehab fix up costs and subtotal. Subtract the sales costs, holding costs and rehab costs from the projected sales price. Now subtract that figure from your original purchase costs and what is left over is your profit or loss. The calculator will do the work for you, but you now have an idea of your profitability.