SOLD! $76,000 Profit On A Nightmare Flip - I feel like a beginner

80 Replies

Hey Bigger Pockets!  Once again, I am starting one of my posts out by making the disclaimer that I truly would like to post more, and share all our successes and failures so that everyone can learn from them.  It takes a lot of time to do our business, and posting does too :)

So that you know what you are in store for, this house made me feel like I was brand new to real estate again.  Everything that could go wrong, did go wrong. Things that MY Company knows not to do, we did.  Things we know to plan for, we did not.  Mistakes we have made before AND made systems to avoid, we made those mistakes again.  For whatever reason, this house almost got the best of us, and we were saved by the market and not so much our skill. 

From my project manager quitting half way through the job, General contractors doing horrible workmanship, my sub contractors failing at their work, the Cops being called on us TWICE, me working at the property personally till 1am multiple times, being almost 90 days over schedule, the city of Bellevue creating challenges, us forgetting about holes in roofs, being over budget by $26,000! you name it...lots of rookie mistakes for us on this one.

This is a long post, but the information will help you on your next deal.

Before Photos (How we bought it)

The Property:

Before: 3bed/1Bath Finished 1010 sqft Rambler (rancher)

After: 4bed/3Bath Finished 2020 sqft Rambler with daylight basement

This house was tied up on market (believe it or not) for $400,000 by a local wholesaler, whom I purchased from for a total of $410,000.  This was the "worst house in the neighborhood" and was in this current state for almost 3 years.  No one lived there the whole time. 

I have done a lot of ramblers in my time, so this one was no different for us. There is a simple way of take 2 of the beds on the top floor, and combining the two of them to make a master suite with a full walk in closet and a master bath.  We then built an additional bath in the basement and added two beds in the basement as well.  Normal stuff for us.

Budget: $90,000 - do higher end modern finishes throughout

Take about 4 months to complete

What went wrong?

We always have a rehab plan, if you just wing these jobs, you'll always be over budget and over time.  Our budget was tight for us, but with our in house project manager, multiple subs we have used over the years and a GC we can bring in after sheetrock to finish the house up, what could go wrong?

We got too confident in our successes, and we mis managed the job.  By not paying attention to the details (like we teach everyone to do), a lot of challenges occurred for us.  Here is one pic for instance:

Anyone see a problem?

This sort of thing happened to us so many times.

  • We had a deck built crooked.
  • We have electrical outlets placed in the way of cabinets.
  • We forgot to frame out a closet (left it off the plan).
  • We didn't order tile soon enough, and tile we picked was special order, took 3 weeks
  • Original tile guy walked off the job and left us 2 days before stagers arriving
  • Got two tile guys out to property till 1am the night the original guy bailed. Cops got called on us. Midnight with a tile saw in a carport?
  • Tried to convince cops to let us pay the Noise Ordinance fee and let us keep working, didn't work.
  • Found two holes on the roof 4 days prior to listing - plumber put them there 2 months prior, forgot to tell us...does it rain in seattle?
  • Original kitchen cabinet measures were wrong. Cabinets that were sent didn't fit. Had to get all new set. Major delays, and created electrical problems since the electrical was placed based on original plan - budget hit
  • My full time Project manager quit half way through the job. I had a lot of other projects going on at same time too. I had to jump in
  • I personally worked at the property with my Acquisitions Manager till midnight and 1am about 5 different nights in a 8 day span
  • I got the cops called on me personally the night before listing...chop saws at 11pm pisses people off

I could keep going with this list...

After photos:

What did I learn?

Never take things for granted.  We worked hard on this house, but not till things got bad.  If we would have done what we normally did, and made a very thorough plan from the start, managed that plan, took time to hold people accountable, we would have done a lot better.

By not doing these things, I went 3 months over schedule (Holding cost increase: $14,454) and added about $20,000 to our rehab budget.

Total loss of profit due to mis management on my part: $34,454

Final Numbers:

Purchase: $410,000

Rehab: $110,000 (approx)

Total holding costs 7 months: $33,727

Loan points: $10,200

Selling Costs (listing/fees/excise): $56,700  (WA has 1.7% excise tax on sale amount)

Final Sales Price: $700,000

Total Profit: $76,877

WE GOT LUCKY!!!

Our original projection for sales price when we bought this house was $635,000!!

If we would have sold for only $635k, my profit would have been only $17k.  And a house that took so much time, energy, and effort, would have been a total failure.

Some of you may be thinking that you would still be happy with $17k! And that I should not be complaining if that were the case.

Well, remember that we are investors, and a 3% ROI, is horrible over 7 months. Not to mention the amount of personal time, stress, sweat, and personal labor costs that I went through on this house.  That would make this a failed investment, if that were the case.  We are not in the business for 3% with a tremendous amount of personal effort.  Remember, your time is valuable.  I do not work on houses unless the **** hits the fan, and neither should you.

Thankfully the market is insane, and this house got an offer at 700k in 3 days.  I am glad it is behind us.  We have re tooled our systems, we do not take our success for granted anymore, we hold people accountable always now, and this will never happen to us again.

Feel free to reach out to me anytime! I am always happy to help and share as much a possible!


Updated over 1 year ago

Ha..just realized I spelt Beginner wrong on the subject. And it will forever be on BP that way. Apparently attention to detail is still something I need help with, not just in real estate

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Very Nice Tarl, im glad it turned into a big win.

Medium new american funding logo  Albert Bui, New American Funding | [email protected] | 949‑514‑5106 | http://albertbui.com | CA Lender # 345453, WA Lender # 345453, TX Lender # 345453, TN Lender # 345453

$76k profit? Can't complain too much :-)

Thanks for sharing and the pictures look AWESOME!

Originally posted by @Tarl Yarber :

Remember, your time is valuable.  I do not work on houses unless the **** hits the fan, and neither should you.


 Excellent write-up.  Thank you.  The above quote summarizes my eventual goal.  Right now I have to lead my guys by example in the trenches to keep costs down but I want the business to grow so I can be an office guy and not swing a hammer unless the sh*t hits the fan :)

One thing I've noticed on the boards so far is the accountability everyone seems to have. It's incredibly refreshing.

@Tarl Yarber , I love how you almost treat the profit as an afterthought. For a newbie like myself, this is a great way to think because a project like the one you just described is not going to provide sustainable success. 

Posts like this make me so glad to have signed up for BP. I love the thinking and accountability. Thanks for sharing. 

And also, congrats on the profit. That place looks amazing. 

Amazing. Love the detail in your post. Love the finishes too.

Taking care of the details is so important, it can really separate a successful flip from a failure. I find the same thing for picking finishes. Two flippers could spend the same amount of money on the same property, with one increasing the value significantly and one not. Finishes need to be what buyers want, and details matter. Sometime people will tell me that it doesn't matter if the electrical plug isn't straight, that buyers won't notice. Wherever I can though, I fix things like that. I find taking care of the details separates a good renovation from a cheap flip, and helps get a better price for the property.

Congrats on your success!

Medium bliss light blueLuc Boiron MBA, JD, Bliss Realty Inc.

@Tarl Yarber - It is an absolutely beautiful outcome.  Thank you for sharing.

What finish did you use in the bathroom (not the white tub picture)?  Is that a large walk-in shower with tile on the walls too?  I couldn't quite make out the brown rectangles on the walls.  Are they large tiles?  Is it all open or is there a closure?

thanks, Jim.

Gorgeous! Beautiful flip, great profit!

Thanks for your humility and sharing what to avoid and to look out for.

Congrats!

Wow!! Awesome!! Beautiful pics!

Originally posted by @James Mc Ree :

@Tarl Yarber - It is an absolutely beautiful outcome.  Thank you for sharing.

What finish did you use in the bathroom (not the white tub picture)?  Is that a large walk-in shower with tile on the walls too?  I couldn't quite make out the brown rectangles on the walls.  Are they large tiles?  Is it all open or is there a closure?

thanks, Jim.

 Hey James! Those are 12x24 tiles with a 2x2 mud pan for the walk in shower. Believe it or not, they are dark grey, must be the resolution on your screen or the pic itself. No enclosure on that one, i don't usually put them in unless i have to. This house i did not and it saved me a few bucks.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Great ! Learn from you a lot, thanks for sharing ! 

Originally posted by @Stone Teran :
Originally posted by @Tarl Yarber:

Remember, your time is valuable.  I do not work on houses unless the **** hits the fan, and neither should you.


 Excellent write-up.  Thank you.  The above quote summarizes my eventual goal.  Right now I have to lead my guys by example in the trenches to keep costs down but I want the business to grow so I can be an office guy and not swing a hammer unless the sh*t hits the fan :)

 Hey Stone. Keep working on your systems. If you want some more advice or help on anything, shoot me a private message

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Originally posted by @Cosmo Iannopollo :

One thing I've noticed on the boards so far is the accountability everyone seems to have. It's incredibly refreshing.

@Tarl Yarber, I love how you almost treat the profit as an afterthought. For a newbie like myself, this is a great way to think because a project like the one you just described is not going to provide sustainable success. 

Posts like this make me so glad to have signed up for BP. I love the thinking and accountability. Thanks for sharing. 

And also, congrats on the profit. That place looks amazing. 

 Cosmo, i love that you loved that part. That was what i am hoping more and more investors will begin to pay attention to.  If they do not, and the market shifts, a lot of them will get caught with their pants down.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

good work to squeeze out 10% of gross on a project you thought was a failure is not bad.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Awesome write up

@Tarl, QUESTION

What's the name of the wood flooring? It looks phenomenal.

Great work!   Nice to see a good success story out of Bellevue! 

Ben Meisel, Harris Realty | WA Agent # 96020

@Tarl Yarber I think most people with a story like yours would only talk about the profit. They'd say something like, "Yeah, there were a few bumps in the road, but look at all the money we made!" 

One thing I've learned is to separate the process from the outcome. If you do everything right and things don't work out, that's bad luck, but over time it'll bear way more fruit than someone who does bad work, gets lucky, and considers that a path to success. 

I commend you, sir. Can't wait to hear about your next success. 

Incredible job and fantastic pictures, this post is a great inspiration and gives hope knowing that the pros have trouble too!

@Tarl Yarber

I fail to see what was wrong with it before! Haha great job on the rehab. The end product is amazing!

Did you replace the siding? If it's paint, what kind of paint was/is it?

Very nice! Place looks amazing.

Well done!!

Originally posted by @Jay Hinrichs :

good work to squeeze out 10% of gross on a project you thought was a failure is not bad.

Thanks Jay.  I blame the market on my success for this one.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you