First successful flip in SoCal... And it's only the beginning!
Hello my fellow BP'ers. This is my first post after many months of silence on Bigger Pockets. Let me first begin by briefly introducing myself as I have not yet done that formally here.
I had a vague interest in house flipping for the longest time and finally about July of last year I started really getting my feet wet when I accidentally bumped into Bigger Pockets (so glad I found this website!). I started reading up on everything I could find about house flipping, listening to podcasts, reading books, meeting people, attending REIA meetups, and just basically gearing myself up to start investing in real estate. I started drafting a business plan, a marketing plan, short term and long term goals and decided that wholesaling was the way to go as a beginner before transitioning to flipping houses. But as I began implementing the details I found myself worrying too much about the little things and was basically wasting too much time setting up the business rather than doing the business. I also realized that with some seed money, which I was able to get out of the equity in my house, I could jump directly into flipping if I could partner up with somebody and the right opportunity presented itself.
So, with a partner that I met in one of the many REIA meetups that I was attending, I set out to start sending marketing material via mail houses to reach out to distressed homeowners and kept it going for about five months. Now, I'm in Southern California and everybody knows that there is fierce competition out here. And out of all the places in SoCal I'm based in Orange County so after having been educated to start local, I was marketing to Orange County. So yes, you can figure what my response rate was. I eventually expanded to other areas outside of the OC and had a few very promising leads, which did not fully pan out due to various reasons. So I decided to try other ways to bring in deals including door knocking, cold calling, reaching out to wholesalers and agents, searching on craigslist, etc. But what I found to be the most effective and essential method in getting deals was networking and getting to know other fellow minded investors, wholesalers and agents.
So to no surprise, the first deal was brought to me by a short sale agent through a fellow investor who also became an active business partner in this and other deals that I have going. As much as it was my first flip, it didn’t bring with it a shortage of headaches and drama, not to mention valuable lessons learned. The house was a short sale so it didn’t have any major issues or defects, in fact, it was in such a presentable condition (except for the paint scheme which was otherworldly to say the least) that we could just turn around and sell it without lifting a finger. Or so we thought. And that was one of the biggest mistakes we made. Shortly after we took title we were approached by several agents telling us they had interested buyers. We even got two offers, although not in the price range we would have liked at the time, which we turned down. Our decision to list it and attempt to sell it ‘as is’ cost us a month. We eventually decided to rehab it and put the house back on the market after another month or so.
The house being part of a PUD brought its own set of problems, especially with different parts of the backyard fence being shared with three different neighbors. I won't go into any details as I don't want to make this post any longer than what it is already but I will say that I am now much more conscious of the HOA and any neighbors than ever before. I also had two active partners, making us a total of three partners trying to flip one house. Try and figure what that means :-p But all in all, we had fun and I learned a ton.
So, with that, below are the final numbers (not a great ROI but hey, I'm thankful I didn't lose money)
Purchase Price: $550,000
Rehab & Staging: $36,000
Money Cost: $28,000
Holding, Closing, Commission: $31,000
Selling Price: $670,000
Net Profit: $25,000
And below are some before and after pictures:
As this one just closed escrow last week, I’m in two other active flips, again thanks to networking. All of this would not have been possible if it wasn’t for the people around me. So, I’d like to give a big shout out to everyone involved in catapulting me to my next chapter of life which I dearly love and enjoy: @brandon turner @josh dorkin @joe homs @david church @tim fitzgerald @luana sarmiento @desi arnaz @rosa harding @j scott @scott mednik @kirk carlstrom @kurt demeire and many others!