I just wanted to share my story as I think it can help people looking to start flipping house. In August of 2013 I closed on a foreclosure that I was going to be doing a live in flip. I think most newbies would have and should have run in the other direction on this house as it had a lot of problems(I have a construction back ground so I was less scared). Starting with the fact that you could not see the property until you had an accepted offer on the house (this was an mls listing). This house had been empty and tied up in court for over 6 years because of the issue of it being land locked with no egress means. It was a family deal where the neighbor had sold a portion of his land to his brother but no egress had ever been filed or provided. The neighbor had been forced to allow egress on his land by the courts but there was no driveway to the house yet. So I walked onto the property and looked through windows and decided it was worth making an offer in it. The bank countered and so on. So then after getting an accepted offer we have an inspection done and find more problems inside such as mold and mechanicals that are shot. At this point we go back to negotiations and get another 30k off our offer.
Now we get to start dealing with the neighbor as he has a fence in the middle of the egress however we made part of our offer contingent on it being removed before we would close on the house. The neighbor did remove the fence however he also removed all the fence that was along the front of our property. At this point for about the hundredth time I am thinking are we making a huge mistake. So we went back to the bank to see how they want to deal with this. They basically took the cost to replace the fence off the price. We now close and move onto rehab before we can move in.
I start by tearing out the basement myself to get rid of the mold. I have a friend who runs a company doing this so I borrowed his equipment for the cost of filters and chemicals (about $1000). I also had about 2k in dumpster cost. My estimates to the bank for this were 20-30k which is one of the items that helped me get the additional money off purchase price. The other major repairs were putting in geothermal heating and cooling, a new kitchen, the driveway, and a new master bath.
So the numbers on this deal go like this
Purchase price. 166500
Appraised price when we refinanced the construction loan. 425k
So if we decide to sell we should make a profit of about 100k after realtor fees and closing cost. We may not move for a while because we love the house and 2 acres of land it is on. No matter what I now have the ability to use the equity in future deals if need be. Also this was A LOT of work and stress on both my self and wife who by the way was 4 1/2 month pregnant when we closed on the house. Don't ever start your first flip with a pregnant wife it will be hell.
So lessons I learned is you can make very good money but it was way more work and took a lot more time than I was thinking before I started. Also it was very rewarding seeing the projects as I finished them. Sorry for the long post but thanks for reading
@Adam McCarty - Wow that's a massive undertaking. However, the fact of the matter is that you came, you saw and you conquered this wildly project.
Yes, it's a lesson to all REIers....new, seasoned, young or old.
I am happy to know that you and your family are enjoying the fruits of your labor.
Now, you can basically utilize your house as an ATM and withdraw cash to fund your next flip or buy and hold initiative.
This is a good story to tell and was worth reading.
Good luck with your future endeavors.
BTW, it would be great to see those before and after photos if you have them.
@ Linval T
Thanks for taking the time to read. I am glad you liked the info. I definitely had no idea how big of chunk I was biting of when I started but now I am not afraid of any kind of rehabb
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