I looked for a forum called "flipping fails" and could find none, so in the interest of full and honest disclosure of good, bad, and ugly sides of this business so that you don't get the wrong idea that real estate investing is all roses and buttercups...I present the following "flipping fail" to share a big lesson learned.
This project started with good intentions 2 years ago when I found a HUD home in a resort area of east central Georgia called Lake Oconee. Below is the before pic. It was a nice 3000 sq ft house on a 2 acre wooded lot across the street from a 30 sq mile recreational reservoir where lake frontage homes were listed at $500,000 and up. The house was built in 2005 that had some cheap finishes on the inside and deferred maintenance / wear and tear issues. They never poured a walkway from the driveway to the front step and only 1/2 of the driveway was paved. The section from the street was just gravel. The county had the tax value set at $317,000. I purchased the property for only $200,000 and figured I could not loose.
Repairs included finishing the driveway with concrete, pouring a walkway to the front step, solving a crawl space water retention issue, installing new hardwood flooring, replace all "gold" fixtures with brushed nickel, interior and exterior painting, replacing the septic pump and replacing light fixtures. Total cost of repairs and holding costs: $52,000 more than expected but still ...no problem in my mind. Here is the after pic. I thought it turned out great and someone would jump all over it for $329,000
After all this house would cost $450K if were in my neighborhood so no big deal that we went over budget on renovation by $20K. Well fast forward 2 years later and the house sat and sat with very few showings and little interest. It was a mystery to me. I eventually had to drop the price to $275,000 and it sold within weeks for a grand total of about $3,000 profit in exchange for tying money up for a long time...Fail!
The lesson learned...never argue with the market! The comps are the comps and they are a true reflection of what a property is worth in its local market, NOT your home market. I will never make that mistake again.
Chris Licavoli MBA, Oglethorpe Properties | 855‑962‑7620 | http://www.oglethorpeproperties.com
@Chris Licavoli At some point or another we've all been there as seasoned rehabbers. Whether we get too confident and optimistic- you cut your losses and move on. Good to hear that despite not making any money you didn't lose your shorts though- it could've been way worse!
Some of the best lesson are learn in the, what didn't go the way we thought it would section. Hey, it could have been worst. Thanks for adding some reality to this section. I'm sure most of us who subscribe to this section primary want to read upward story, thanks for a reality check. Life is full of edd and flow that which make it worth moving forward, and business, real estate is no different.
Thank you @Chris Licvaoli , for sharing your experience with us, and the reality that there is always a chance that I wont go as planned . I'm glad you still made a profit , best of luck on your next property.
to your success
Thanks Chris for your honest post. Sometimes, the best intentions... But we can learn from this. It that regard, what were the comps at the time? Were the comps $275K or $325?
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