Hi guys, just wanted to share my flipping experience.
Two of my brothers, myself, and our RE agent got together to do our first flip. We discussed our plans and strategies many times and went through number of houses on MLS. Whoever lives in Seattle they know that it's nearly impossible to find something good due to the market.
So we decided to go with an auction at a court house and a hard money lender. Who could think that every other home buyer these days buys his property on auction (at least that's how it seems to be in Seattle). We ended up paying more than we should have. Please, be smarted than we were, do your due diligence and STICK TO YOUR NUMBERS. If you can't win a property it doesn't mean you have to overpay for it.
We ended up getting a 1979 3/2.25 split level house that had an original kitchen cabinets, aluminum windows, and popcorn ceilings.
We ended up gutting the house down to drywall. Upgraded all windows and doors (except an entry door). Bathrooms and kitchen were fully upgraded - all cabinets, tile, fixtures, counter tops, and appliances are new. New engineered hardwood/carpet/vinyl throughout the house, as well as a fresh coat of paint on the inside and outside.
Overall the flipping took us little less than 2 months considering that we worked after our day jobs. Most of the work we were able to do ourselves since 3 of us (2 brothers and I) do this type of work for living. We've hired a few contractors to do popcorn removal and drywall patching, painting, and carpet installation.
We worked well together as a family. But since we brought one more partner and no one bothered to write anything down (we thought we knew each other well enough) we've learned some pricy lessons.
Things to remember for next time:
- Never partner with anyone unless it is extremely necessary.
- More partners you bring to the table - less money you make.
- Describe what everyone has to bring to the table and adjust your profits accordingly.
- Never rely on ARV from RE agents.
- Have everything written on a paper even if you partner with you brother/sister or closest friend ever.
- If you are rehabbing, spend some time at the end of the day and plan for tomorrow.
- Do everything that needs to be done right, but don't get carried away with too many things that don't bring the ARV up.
- Even if you want to save money, it could make more sense to hire a professional to replace your garage door.
- Make money when you buy a property and not when you sell it.
- Don’t scare away potential buyers with your overpriced house.
Here are some pictures of the house.
We've already installed new windows and trimmed them. Garage door also had to be replaced.
Should have taken a picture with old cabinets, but now they are gone. Wall/pantry that separated kitchen from living room was demoed (you still can see on a floor where it used to be). New partition between sliding door and kitchen.
Congrats for stepping out on faith and doing it.
1. You are learning because you are doing
2. This is your first 1. It will get better
3. By your posts I see you have taken good note on what NOT to do
Keep Going and you will be successful. I had to learn the hard way as well. It gets better
Have a great day!
Nice job Victor. When did you finish the house and is it still on the market?
I'm curious with so many partners, how did you divide up the responsibilities and work load?
@Aaron Reynolds It's a little over a month since we've finished the house and got it on market. It is still there.
Yes, too many partners and it's not very good. We had to start somehow and we didn't have much so decided to pull what we have together, make less, but start.
Our REA (real estate agent), my brother and I agreed to bring the same amount of money to the table. Another brother couldn't bring anything, but he had to be more involved by working on a project, so that all profits would be split equally among 4 of us + REA had a reduced listing fee.
The way everything ended up was not the way we expected. For 2 months every day after work and Saturdays 3 of us (brothers) were going to the project and working on it. Although one brother didn't bring anything to the table we ended up working as much as he did, but it's fine. We are happy to help him out.
We've only seen our REA 3 times helping with a project. It wouldn't be a problem either, but since he gets paid for his professional work by still charging a fee, I feel robbed when I compare 3 days to 2 months with the idea to split everything equally.
This is truly the biggest mistake and lack of writing everything on paper.
Work load was simple. We had an idea of what we want to do and what we like. Having a BA in Architecture I was making many decisions after discussing them with partners. One brother worked our financial side of it, and another brought most of the constructors that we used. We did a lot of work ourselves and 3 of us really knew what we were doing since we do it for living.
Can you provide some numbers?
current holding costs?
what were some expenses you didn't anticipate?
what is it listed for?
By the way, beautiful home.
The house looks great. I especially like the exterior and the foyer. I had to laugh when I saw that you'd suggested hiring professionals to install the garage door. Just a few weeks ago I watched my husband and his partner struggle with a garage door for two full days. They are both highly skilled contractors but the garage door install nearly brought them to their knees.
It was such a pleasure to meet you and your brothers the other night. I have such admiration and respect for everything you have been through, your determination to succeed and the commitment to your family. Each one of you, the team you have created together, and what you have accomplished... Is an inspiration!
I think you guys did a phenomenal job! The house is beautiful without a doubt. I see the house is located in Federal Way but I'm curious how the neighborhood compares to this house. My thought is that the house may be over rehabbed which cuts into your profits. What I have learned through my research is that the best way to know how much to rehab is to look at the retail houses on the market that sold to see what the bare minimum you need and compare flipped houses sold in the last 6 months to see what you are competing against. This should give you a ballpark of the type of work you need to do on your flip. You don't want to over doing it but at the same time you don't want to under shoot as well. You'll need to find a good balance.
I am sorry about your REA. It sounds like he/she talked up the value of the price without giving you a reasonable estimate. Did the three of you and your REA tour the neighborhood for comparable properties, both before purchasing the property and afterwards? That is really how you get a good feel about what upgrades are worth the money, and what can be done without.
Nice house, I like the reno!
Also good tips for new investors thats just starting out.
Very nice rehab property
@Damon Armstrong We bought it on auction for 225K and spent about 35K on rehab. Holding costs are 2,000 per month + utilities. Basically with all listing fees and other our brake even point is around 300K. After a price reduction it is listed at 314.5K
@Jessica S. those doors had best of us. It took 2 of us pretty much the whole day and it would've been more efficient to pay $350 and have it done by pro while working on something else.
@Viktor R. Right, we did look at what was on market at that time and it was either outdated or completely redone. We should have kept bathrooms and just upgraded cabinets.
I think we really overdid it, although we were very conservative money-wise doing lots of work ourselves. What killed the deal was an acquisition. It ended up being 70% of ARV with rehab cost on top.
Putting money aside it was a great project and we've learned a lot.
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