The each factor was weighted according to which

The second house flipping project, the home is in a
pricey neighborhood and the value surpasses the $500,000 market price.  The home market value in that area would
easily be worth $350,000.  The investor
is willing to invest $350,000 and generate a revenue of $375,000 which are paid
in 3 years at 6%.

PV= $315,126-$350,000= NPV -$34,873

 

The third house flipping project, the home is in a golf course
community in which the homes have a value of $750,000.  At that price the home market value would be
worth $525,000.  However, this particular
home is a foreclosure home and the city is considering condemning the
home.  The city has placed this house on
the market with a MLS price of  $250,000
dollars.  The investor is willing to invest
the $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 Scoring
Model

The decision matrix used with these three house flipping
projects 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.

 

                                            Project
One                     Project Two                 Project Three   

 

Profitability                                         4                                  3                                  5

Break-even                                          1                                  2                                  3

ROI                                                     2                                  1                                  5  

NPV                                                    2                                  1                                  5

Repair costs                                        4                                  3                                  1

Impact on cash flows                          3                                  4                                  1

ARV                                                    4                                  3                                  5

Total                                                  20                                17                                25

 

The decision matrix used with these three house flipping
projects will help to 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.  With all three of the projects,
each factor was weighted according to which house flipping project was more
important.  The project with the highest
important factors was house project number three with a score of 25.  Based on this weighted factor, as the project
manager who has an investor to look out for this decision matrix would clearly
give me confidence in picking house flipping project number three. 

 

The reason is one of my duties is to show the
investor how much he/she would be generating in returns on their
investments.  With project three the
investor would be gaining a 20% gain instead of losing on their
investment.  Projects one and two clearly
show the investors losing money on their investments.  However, projects one and two would also be a
consideration and could be projects to undertake.  Further discussions would be conducted to
re-negotiate the particulars of the payback periods and the interest
rates.