The Foreclosure.com Flip Formula for Success

To properly analyze the value of a potential flip it is a good idea to have a time-proven formula with which to work.

Adopting a successful formula and following it can help minimize the chances of being surprised by unexpected costs that eat into your net profit and turn a great deal into a money pit.

Far too often, an inexperienced investor will try to analyze a flip by taking the cost of the property he or she has purchased and adding the repairs and carrying costs to arrive at a projected re-sale value.

However, the re-sale price is not arbitrarily based on the amount of money that is invested in the property plus a sizeable profit. On the contrary, the re-sale price is based on comparable sales in the neighborhood that take into account the size of the property, its condition and amenities.

Here is an easy-to-understand formula that works for us:

Realistic Re-sale Value (RRSV)

minus Seller Closing Costs (SCC)
minus Debt Service (DS)
minus Repair Costs (RC)
minus Minimum Acceptable Profit (MAP)
minus Buyer Closing Costs (BCC)

= The X-factor: Maximum Property Purchase Price (MPPP)

We call this the Foreclosure.com Flip Formula for Success. Write it down and keep it in a safe spot, because you will need it one day soon.

In our next post, we will explain this formula in more detail and also tell you how it can keep you on track and under budget.