The second house flipping project, the home is in apricey neighborhood and the value surpasses the $500,000 market price. The home market value in that area wouldeasily be worth $350,000. The investoris willing to invest $350,000 and generate a revenue of $375,000 which are paidin 3 years at 6%.
PV= $315,126-$350,000= NPV -$34,873 The third house flipping project, the home is in a golf coursecommunity in which the homes have a value of $750,000. At that price the home market value would beworth $525,000. However, this particularhome is a foreclosure home and the city is considering condemning thehome. The city has placed this house onthe market with a MLS price of $250,000dollars. The investor is willing to investthe $250,000 and would like to generate $300,000 in one year at 9%.PV=$275,229-$250,000=NPV $25,229.36 The Unweighted Factor ScoringModelThe decision matrix used with these three house flippingprojects will evaluate profitability, break-even, return on investment (ROI),net present value (NPV), repair costs, impact on cash flows, and after repair value(ARV) for all three projects to help decide with project should we accept.
ProjectOne Project Two Project Three Profitability 4 3 5Break-even 1 2 3ROI 2 1 5 NPV 2 1 5 Repair costs 4 3 1Impact on cash flows 3 4 1ARV 4 3 5Total 20 17 25 The decision matrix used with these three house flippingprojects will help to evaluate profitability, break-even, return on investment(ROI), net present value (NPV), repair costs, impact on cash flows, and afterrepair value (ARV) for all three projects to help decide with project should weaccept. With all three of the projects,each factor was weighted according to which house flipping project was moreimportant. The project with the highestimportant factors was house project number three with a score of 25. Based on this weighted factor, as the projectmanager who has an investor to look out for this decision matrix would clearlygive me confidence in picking house flipping project number three. The reason is one of my duties is to show theinvestor how much he/she would be generating in returns on theirinvestments. With project three theinvestor would be gaining a 20% gain instead of losing on theirinvestment.
Projects one and two clearlyshow the investors losing money on their investments. However, projects one and two would also be aconsideration and could be projects to undertake. Further discussions would be conducted tore-negotiate the particulars of the payback periods and the interestrates.