The REAL flip adventure begins

Well, it’s been an exciting, depressing and stressful past couple of weeks. We learned a few big lessons in flipping, and in real estate in general. I’ll get to each lesson as we go.

We were originally scheduled to close on January 12th but because we hadn’t seen hard numbers from our contractor we pushed back the closing to the 19th. The title company was telling us that per the contract we had to close on or before the 19th and since the 19th was a holiday it would have to be the Thursday or Friday before, the 15th or 16th. We had never seen anything stating that and the letter we received from our realtor stated the 23rd, not the 19th. I forwarded this to the title company and they confirmed the final date was the 23rd, they had confused our file with another. After discussing it further however and not wanting to completely miss the “snowbird” season we decided to close on the 14th so they could get to work and we could get it on the market sooner even though we have to hold it for 90 days before we can sell it again per the contract. Now on to the bank.

The title company told me that to close on the 14th they would need a cashier’s check by the 12th to be able to close. They emailed me the closing documents and told me to return them with the check ASAP. I sent them overnight via FedEx on Friday the 9th. I got an email from the title company on the afternoon of the 12th titled “URGENT!” Included in the email was a scanned copy of the cashier’s check which the teller at the bank had forgot to sign so the title company couldn’t accept it, she was sending it back overnight. I wasn’t able to get to the bank until about 5:15 PM on Monday the 12th to inform them of their error and to see what we could do to resolve it. They said they could issue another check but not until they had received the original because the funds had already been withdrawn from my account. I didn’t have another $67,500 lying around so we had to wait.

The check was delivered on the 13th but even with overnight a new check wouldn’t arrive until sometime on the 14th. I don’t normally bank with this bank, we just have a HELOC with them. Long story short I opened a no-fee checking account, they waived the wire fee and the title company got the money a couple of hours before the closing. Lesson learned: Always check the cashier’s check to make sure someone from the bank signs it! Now on to the contractor.

After having been to the house a couple of times, before and after the home inspection, our contractor kept telling us that the rehab would probably be between $15-$20,000, probably closer to the $20,000 side. We were okay with that. Finally, a week or so before closing he got us the final numbers. $27,000 and some change. Ugh! He admitted that he had been conservative on some of the numbers but still, that’s 35% higher than the high end of the original estimate. The check had already been sent to the bank so we had to hurry and crunch the numbers and decide if we wanted to lose our $500 earnest money deposit or if we thought we could still make it work. We decided we would still make a go of it. While our profits might be a bit less than we originally thought we think we can still make money. Lesson learned: ALWAYS get hard numbers from your contractor before your contingency period expires.

It’s now the 21st, 1 week after closing. Demo has been done, drywall patching and replacement has been done, the bathtub and plumbing have been replaced in the guest bathroom and the ceiling and trim should be finished being painted by the end of the week. Next week the walls will be painted and flooring will be going down. Kitchen and bathroom cabinets have been ordered and should hopefully be here by the time the flooring is finished. I’m trying to get pictures from my technically challenged contractor and will post them as soon as I have them. I have included a few below of the kitchen and bathrooms before any demo was done.

So catching up on costs:

Purchase: $67,500 cash (using HELOC so there will be finance charges)

Closing costs: $173.85

Inspection: $440.00

Insurance: $948.00 (This is the first payment. 1 year policy total is approximately $1500 but refund will be prorated depending on sale date)

Initial check sent to contractor: $5,000

First electric bill for hook-up: $16.84

Total to date: $74,078.69