Page 32 - From Ghetto to Gucci: The Basic Principles of Flipping Houses

Good, now you’ve gone through and gotten an idea of the amount that you’ll have ready to
invest in flipping. This number is crucial to your plans. It lets you know, before you approach any
project, whether or not you’ll be able to fund it.

Profit/Loss Worksheet

Now comes the fun part, where we go over the profit/loss worksheet included with this material.
This is the real meat and potatoes of buying houses. Let’s go over the profit calculator now:
● Estimated Value. This is the price you believe that you’ll be able to get for the house.
Make sure that you only use comps to establish this value! And be conservative in your
estimate.
● Estimated Time. This number is something you can get from your contractor. Ask them
how long it will take to finish the job, and add 30% to that number plus 40 days and
you’ve got your projected flip time, from purchase to sale.
● Real estate commission. This can vary from state-to-state. This will be the commission
rate multiplied by the estimated value
● Closing costs – this is estimated to be the transfer taxes and other assorted escrow
taxes. A good estimate of closing costs is usually around .75% of sale price
● Taxation – this is the estimated property tax burden for the time that you own the
property. You will need to find the tax rate for your county and enter it in here, and
multiply it by the sales price.
● Repairs – this is the number that you’ve been given in repairs from your contractor after
you’ve looked over the house. You’ll also be developing this number with help from the
repairs worksheet that we’ll go over next.
● Liens – if you’re buying subject to (taking on liens) or at a foreclosure auction, what is
the total amount of liens that you’d be under obligation to pay?
● Finance fee – this fee is whatever fee your lender will charge for the money that you
take out.
● Net – This amount is the net amount of profit that you anticipate receiving
● Total out of pocket investment – this is the amount of money that you will have to put
into the deal
● Return on investment – this will calculate what your ROI is anticipated at for this flip
● ROI (annual) – this is your ROI, spread out over a one-year period. It’s what you’d
receive if yearly if you always had a property exactly like this that you were flipping.

And that’s the profit/loss calculator. It’s a calculator that we swear by here at the office, and has
helped guide many good decisions over the years. Study it. Look it over. Get well-acquainted
with it. It’ll help you differentiate the deals from the duds.

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