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Rehabbing & House Flipping

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Mike J.
  • Investor
  • Los Angeles, CA
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107
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Lessons Learned From My $30,000 Mistake

Mike J.
  • Investor
  • Los Angeles, CA
Posted Aug 30 2015, 13:06

Spring of 2010.

We (my father and I) purchased a home in the Inland Empire of Southern California. It was a brand new 3Bed 2Ba SFH that was listed at an unbelievably low price.

A little backstory on this property; this house was built in a burn area. The previous owner's original home burned down and she decided to have a new house built on a different part of her lot. This shouldn't have been a problem except her new house was located 100 feet away from the street, accessible only by a mangled dirt trail. Also, there was no water connection.

Our main tasks for completing this project:

1) Connect water from the house to the water main located in the street (approx. 100 feet)

2) Have a road built from the street to the far end of the property line

3) Construct a concrete carport

So the fun begins.

- The city required an 8 inch water line and a concrete driveway. Our contractor argued that we would use a 3" line and that gravel would suffice. Unfortunately, the city wouldn't budge and our contractor was not the most tactful. Also, the concrete he poured for the carport was so bad that we eventually had to rip it out and have it re-done.

- We fired our first contractor.

- The second contractor seemed promising at first but we soon found out that he was untrustworthy. He wouldn't return our phone calls and could never give a straight answer. Also, he was constantly asking for more money while we saw no progress being made. We eventually let him go.

- The third contractor was nice enough but he was way out of his league. He was more of a handyman than anything else. 8" lines and concrete driveways were a bit much for him.

- On top of all this, the city kept adding things to the TO-DO list: changing out the panels on the covered patio to a type of fire-resistant material, having to build a retaining wall separating our property from the neighbors lot, re-grading the front and back yards, clearing weeds and shrubs from the adjacent lot (not our property btw but we did it because it made our property look bad). And let's not forget that the AC unit was vandalized for the copper.

*The list of things to do was actually even longer but keeping it short for time*

- After letting go of our third contractor, we found our final contractor who mainly dealt with commercial projects. He was finally able to complete this "flip" but told us that this was one of the most challenging projects he's ever had. Go figure.

We completed this project and sold it in the Spring of 2013. In the end, we lost about $30,000. Also, let's think about all of the opportunities we missed out on because we were so tied up with this house.

Lessons Learned

1) Do Your Homework. If we would have spoken to the city about what they wanted instead of trusting our first contractor, we could have potentially avoided this nightmare altogether.

2) Network With Other Investors Who Have Done Work In The Area. They'll be able to tell you about working with the municipalities, demographics, crime, etc. Bigger Pockets would be a great place to do this.

3) Having A Good Contractor Is Key. If we had our 4th contractor from the beginning, I do believe that while the costs would be higher than initially planned, we would have saved a lot of time. Time = Money.

4) If It Sounds Too Good To Be True, It Actually Might Be. This was supposed to be a 4-6 week flip where we could stand to make $30,000 after everything was said and done. Instead, it took us 3 years and cost us $30,000.

*Special thanks to @Daniel Ryu*

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