Under contract at 214 with two ARVs, 318 and 305

Why do you trust three comps over two agents? I ask as someone who has never done this. Is it that the agents are guessing at what a renovated house should get and the comps are what one actually got?

@wren that's mostly it. A closed sale is a price somebody paid. An agent opinion is a price somebody hopes for, and agents who want the listing have a reason to be generous.

@flint the 61 day active listing is doing a lot of work in that 325 and it's telling you something, which is that the market said no to 325 twice already. I'd throw it out entirely.

Check whether the 5,000 is actually gone. Non-refundable after Friday usually means after your inspection or financing contingency expires, and I've read contracts where the liquidated damages clause caps the seller's remedy at the deposit and others where it doesn't. Read the default section before you decide the walk costs exactly 5,000. If it's ambiguous, that's an attorney question, not a forum question.

Your ARV question is answerable, the scope question mostly is not, and they should be handled separately.

On ARV: three closed comps at 299, 306 and 311, half a mile, five months, similar finish level, is a usable data set. The median is 306. The active at 325 with 61 days on market is evidence against itself. If you want to be defensible, underwrite the middle of your closed range and treat anything above the top closed comp as upside you did not pay for.

At 305 ARV, 214 purchase and 38 rehab puts you at 252 before any carry or selling cost. Add 7 percent of 305, that's about 21,350, and you are at 273,350 hard costs before financing. Your interest on roughly 150,000 drawn at 11 percent over 110 days is around 5,000, plus two points, plus draw and title fees. Call it 280,000 against a 305 sale. That is roughly 25,000, before you have paid yourself for four months of work and before a single surprise. On a 305 sale a 10,000 price cut to move it takes more than a third of that.

The scope cut is where I'd push back. Skipping the second bath in a two bath house is visible to every buyer walking through, and exterior curb appeal drives showing volume. You would be reducing spend by 10,000 in the two places most likely to cost you more than 10,000 of price. If the deal only works with scope cut out of it, the deal did not work.

The assumption everything hangs on is that 305 is right. Pull the actual closed comps yourself rather than taking an agent's set, and note that about a dozen states do not publish sale prices publicly, so in some markets you will need MLS access or a title source to see them at all.

I want to add one line to @rena-expert's math. Your 90 day holding budget against a realistic 110 is a 22 percent overrun on the one input you have the least control over. Do the same thing to your rehab number and 38 becomes 44. That is not pessimism, it's what my last three scopes did.

At 44 rehab and 305 sale you are at roughly 286 against 305. Nineteen thousand for four months and all the risk. What is your labor worth to you?

Dumb question but I want to understand the rule. The 70 percent rule as I read it in the guide is all-in at or below 70 percent of ARV minus repairs. @flint is describing 78 percent all-in against ARV, which sounds like a different calculation. Are those the same test written two ways?

@compass they're two different tests and people mix them constantly. The classic version is max offer equals 0.70 times ARV, minus repairs. At 305 ARV that's 213,500 minus 38,000, so about 175,500 maximum purchase. @flint is paying 214. He's 38,000 over the rule's offer, not 13 points over.

The number @flint quoted, all-in over ARV, is a different sanity check and a looser one. Both say the same thing here though.

@flint I hit this exact wall on my fourth deal. I closed. Made about 11,000 and spent five months. I would not do it again for that.

The thing that would decide it for me is that the acquisition wasn't a discount and @flint said so himself. Everything downstream is trying to manufacture margin that wasn't bought. Cutting the second bath is manufacturing margin.

Genuine question, is 5,000 lost actually the comparison? It seems like the real comparison is minus 5,000 against a range of maybe plus 19,000 down to minus 15,000 if the market moves or the roof surprises you. I would rather take a known small loss than an unknown distribution, but I have never had money in one of these.

I don't understand what cabinet fronts means. Is that different from new cabinets?

@rigging refacing. You keep the cabinet boxes that are screwed to the wall and replace the doors, drawer fronts and hardware. Much cheaper than new cabinets, looks new from three feet away, and it's the definition of cosmetic. If the boxes are water damaged or particle board that's swelling it doesn't work.

@flint what's your paint spend inside? 38 for that list looks lean to me unless you have crews you already run.

Different angle. Is there a version where you close and rent it instead? At 214 plus a lighter turn you'd have a fairly clean three bed. I don't know your market rents and the hard money terms make it awkward, but a bad flip is sometimes an acceptable hold, and it means the 5,000 buys you an asset rather than nothing.

@cairn that was my thought too, though wouldn't he need to refinance out of an 11 percent loan quickly for that to work at all? That feels like a second whole problem.

The deal was decided when the purchase price was agreed, and everything since is arithmetic about how much it hurts. Is that unfair, @flint?

On the scope side, from the build end of it. Your 38,000 has no contingency in it that I can see, and popcorn ceiling in a 1978 house means you should test before you scrape. If it comes back positive your cheap ceiling line becomes an abatement line with a licensed contractor and a schedule, and that is exactly the kind of thing that turns 110 days into 150.

I'd also say exterior trim paint and hedge removal is the cheapest ARV you will ever buy. Two thousand dollars of that changes the photos, and the photos decide showings. Cut the second bath tile surround to a reglaze before you cut the outside.

None of that fixes a 214 purchase against a 306 median.