Lessons learned on my first project

[Eric Gregory]

Coming up on one year ago my wife and I purchased our first investment property. A 1955 build in terrible condition that we intended to rehab and flip to add some cash with the ultimate intention of adding to a war chest to allow more investment and eventually picking up some buy and holds.  

As I'm sure is common with new investors the renovation went over schedule, and over budget.  As we started pulling walls and seeing the quality of the existing electrical we realized that for safety there was no choice but to do a full electrical overhaul.  That doubled our electrical costs right there. We found a great deal on granite counter tops and got them ordered but didn't consider the extra we were going to have to put into leveling the kitchen floor which was badly out of level. There was an extra 5 grand. Quickly figured out all plumbing was completely shot.  $$$.

Anyway we estimated we'd be about 180 all in at the end but actually ended up around 210. We put the house on the market and it's been mostly crickets. I talked with several agents and they've all indicated they felt our asking price was fair and said they were massively impressed with the house, but the thing hasn't moved in 90 days on the market and has barely shown. We listed it as a rental and applied for a DSCR loan. We'd be slightly upside down monthly for right now counting some personal debt but the hard money loan would go away and the interest rate would come down so we'd be able to manage the rest.

Then the appraisal came back. It's not catastrophic but it is about 10k below where we're currently listed.  If we can sell at appraisal price we'll still squeak out with a couple thousand profit.  That's a key item for us. We've learned a tremendous amount in this first project, and if I sell this at the appraised value I get all the cash I invested up front and pay off every scrap of debt. Even if I can break even without an actual profit I'm ok with it.  Education is never free so I'll just call the lost profit my tuition on this one and hopefully we can sell for that appraised price quickly.  If we can't sell fast, the DSCR is still a valid option, but we're coming out of pocket every month even a little more.

I'm mostly just venting but if you've got any advice I'm open to hearing it.

[Matthew Irish-Jones]

Sometimes you win and sometimes you learn.