A successful (barely) first flip!

79 Replies

Originally posted by @Barry B. :

Would it have been worth to flip it, as is, selling it for 25k to someone with more experience?

 I tried for the 1st month we owned it while I was also talking with GC's and subs. Couldn't find a buyer who wanted it, so decided do to it myself. 

I can't tell you how grateful I am to have you list out your experience and numbers.  What a great case study for use new investors!  Thank you for the takeaways, and hopefully you have strength for another.

These are the stories of "gentrification" that never get told.   You literally lifted this duplex from chaos and decay and not just made money for yourself, but improved the neighborhood and gave a grand old building another 50+ years of life.  

@Donald S. If you wouldn't mind, I would like to pick your brain for a moment.  I appreciate your thoughts on the following:

One: Would you mind walking through the your budget process.    

Two: Being this was your first, I can imagine all the numbers thrown your way had to be anxiety-producing. How did you feel comfortable enough with the numbers to pull the trigger?  I understand that your contingency wasn't enough, but you felt confident to move forward.  

What a turnaround!  A lot of first-timers lose their hind-ends on stuff like this and learn half as much, so I think you got a hell of a deal!

Be sure to keep us updated as the next one comes along!

Originally posted by @David Nemrow :

@Donald S. If you wouldn't mind, I would like to pick your brain for a moment.  I appreciate your thoughts on the following:

One: Would you mind walking through the your budget process.    

Two: Being this was your first, I can imagine all the numbers thrown your way had to be anxiety-producing. How did you feel comfortable enough with the numbers to pull the trigger?  I understand that your contingency wasn't enough, but you felt confident to move forward.  

 Hmmm...Budget process...sure. I got estimates from 5 or 6 GC's that ranged anywhere from 120k to 220k to do the whole job. Had them break down by line item of my (very rough) scope of work. From there I wanted to know where the differences where. I got bids from a few different subs, researched material and finishes cost, and chose the contractor I thought gave me the best price/finish/quality work while staying low enough to give me a profit. 

I figured I could do the tile work and paint work myself, as those tend to be very expensive trades, had him rework his bid, and subbed a few of the items to subs of my own that could do better than the GC could. i.e. I have a window guy who's great and got it all @$305/window, my concrete guy (while slow) was good quality and fairly priced and gave me a discount since I gave him the demo and fence work as well. All told we figured the rehab would cost us about $140k all in. With that in mind my lender was willing to give me $150k with the extra 10k meant to cover the interest cost of the loan. On top of that he only charged interest on money I had drawn, and we did 3 draws, 35%, 35%, 30%. 

As for your 2nd part. I'm VERY comfortable with numbers, they're easy to work and massage. But to ensure I wasn't valuing the property more than it was I ran my own (amateur) comps as a non-realtor, and had my realtor runs comps as well, and we were fairly close without collaborating, so I was pretty sure of the ARV. I also figured, given the ARV and repair, any overage I could safely cover by eating into my profit, which I ended up doing.

As a fun side, this was my first real flip that I ran comps on, and my initial ARV was $207k. After finishing the work my realtor reran and thought we could do 230k so we listed at 230k. After 10 days we dropped to 223k. Lo and behold we got under contract at 213k with 5.5k concessions meaning....my 207k amateur estimate was pretty much dead on.

Now how did I feel comfortable moving forward lol. I am SUPREMELY confident in my own abilities to get **** done. Some would say overly confident, like I feel I can "will" something to happen if I want it bad enough. And by God that's what happened. It helps when you are used to jumping in feet first. I'm the kind of guy that once I make a decision I go with it, 2nd guessing just ain't my style (at least not until I can't go back anymore lol). 

Hope that helps

Cheers!

Nice work, the final product looks great...Im working on my first flip now and understand some of your pain (unfortunately) but can see the light at the end of the tunnel.  

Originally posted by @Donald S. :
Originally posted by @David Nemrow:

@Donald S. If you wouldn't mind, I would like to pick your brain for a moment.  I appreciate your thoughts on the following:

One: Would you mind walking through the your budget process.    

Two: Being this was your first, I can imagine all the numbers thrown your way had to be anxiety-producing. How did you feel comfortable enough with the numbers to pull the trigger?  I understand that your contingency wasn't enough, but you felt confident to move forward.  

 Hmmm...Budget process...sure. I got estimates from 5 or 6 GC's that ranged anywhere from 120k to 220k to do the whole job. Had them break down by line item of my (very rough) scope of work. From there I wanted to know where the differences where. I got bids from a few different subs, researched material and finishes cost, and chose the contractor I thought gave me the best price/finish/quality work while staying low enough to give me a profit. 

I figured I could do the tile work and paint work myself, as those tend to be very expensive trades, had him rework his bid, and subbed a few of the items to subs of my own that could do better than the GC could. i.e. I have a window guy who's great and got it all @$305/window, my concrete guy (while slow) was good quality and fairly priced and gave me a discount since I gave him the demo and fence work as well. All told we figured the rehab would cost us about $140k all in. With that in mind my lender was willing to give me $150k with the extra 10k meant to cover the interest cost of the loan. On top of that he only charged interest on money I had drawn, and we did 3 draws, 35%, 35%, 30%. 

As for your 2nd part. I'm VERY comfortable with numbers, they're easy to work and massage. But to ensure I wasn't valuing the property more than it was I ran my own (amateur) comps as a non-realtor, and had my realtor runs comps as well, and we were fairly close without collaborating, so I was pretty sure of the ARV. I also figured, given the ARV and repair, any overage I could safely cover by eating into my profit, which I ended up doing.

As a fun side, this was my first real flip that I ran comps on, and my initial ARV was $207k. After finishing the work my realtor reran and thought we could do 230k so we listed at 230k. After 10 days we dropped to 223k. Lo and behold we got under contract at 213k with 5.5k concessions meaning....my 207k amateur estimate was pretty much dead on.

Now how did I feel comfortable moving forward lol. I am SUPREMELY confident in my own abilities to get **** done. Some would say overly confident, like I feel I can "will" something to happen if I want it bad enough. And by God that's what happened. It helps when you are used to jumping in feet first. I'm the kind of guy that once I make a decision I go with it, 2nd guessing just ain't my style (at least not until I can't go back anymore lol). 

Hope that helps

Cheers!

Had your Realtor supported your original estimated ARV of $207k, would you have done the deal differently?

Originally posted by @Kory McCain :

Nice work, the final product looks great...Im working on my first flip now and understand some of your pain (unfortunately) but can see the light at the end of the tunnel.  

 Awesome!  Please post the details when all is said and done.  This is a great education for us new guys!  Good luck!

@Donald S. Congratulations on your first deal. Dont be to hard on yourself so people cant even get off the ground. My first buy and hold was rough also. The first contractor ran off the next contractors . I was paying weekly ( so they couldn't run off) milked the job time is money . What saved me was it was a small rehab 30k .we started in February and refi in October. Yes it was a learning experience

@Donald S.

Donald, thank you for the detailed post. It was very informative and helpful for me. I’ve been looking at similar projects where the rehab work would be substantial, but I’ve shied away on my first deal. This gives me some motivation to look at those deals again. I’m a licensed architect and would be able to subtract those costs from the proforma. Also, it’s good to know that 10% contingency is not enough. I’ve heard 12% to 15% is more accurate these days.

Congratulations!

You did it and did not lose money! At least on your brake down. The hardest part is to start.  A good friend of mine, lender, and investor once told me. "I went to school, paid a TON of money and the only thing I got back was knowledge" Plus a HUGE debt. lol. He said If one deal goes wrong the only way to lose is not to keep going. 

Keep it up!

Awesome first deal, I learned a lot with your explanations as well as the responses regarding suggestions for your next one.  Fantastic information, and thanks for sharing your story.  Congratulations, and best of wishes on your next endeavor!

-Karl 

@Donald S. Fantastic job!! You just learned sooooo much AND you made $13k. That’s awesome! Now most of your projects will seem easy in comparison! Ha

Also huge win on the lesson about your time. My first flip was a big lesson for me and especially for my husband. Just lay someone to accomplish something that is their specialty. DIY hurts my soul sometimes hahaha :)

Bravo!  Seriously, that's an intense 1st flip, but I'm sure you have experience and confidence now that you can use for decades ahead!

Sorry if I missed, it in a previous post, but I think it was mentioned the cost per/Sq. foot was approx $69?    That's pretty intense, even for the shape that it was in.   But again that includes new  everything* virtually. 

I'm trying to get my numbers right for down here in Texas, and I'm trying to use a rule of $25/sq foot for just the floors/ paint/ kitchen/ bathroom updates. 

A/C , Foundation, Roof, Plumbing, Electrical would be separate, as needed basis. 

Originally posted by @James De Stefano :

Bravo!  Seriously, that's an intense 1st flip, but I'm sure you have experience and confidence now that you can use for decades ahead!

Sorry if I missed, it in a previous post, but I think it was mentioned the cost per/Sq. foot was approx $69?    That's pretty intense, even for the shape that it was in.   But again that includes new  everything* virtually. 

I'm trying to get my numbers right for down here in Texas, and I'm trying to use a rule of $25/sq foot for just the floors/ paint/ kitchen/ bathroom updates. 

A/C , Foundation, Roof, Plumbing, Electrical would be separate, as needed basis. 

 Hey James, 

Yeah we practically built a house so our rehab $/sf was really high. Some of our major expenditures off the top of my head:

Plumbing: 24k

HVAC: 12k

Roof: 6k (flat roof TPO)

Floors: 9k (refinished most, replaced the master bedroom)

Electrical: 12k

Demo: 6.5k

Concrete/Fence/Landscaping: 14.5k

Windows: 7k

Tuckpointing: ~6k (if you don't know what that is, it's brick work basically)

Architect: 2.5k

Cabinets and countertops (kitchen): 9k

Framing: 9k

Drywall: 13k

Paint: 4k (paid someone to help so it wasn't just me)

Doors: 5k (lots of doors including 4 exterior)

Appliances: 2.5k

Staging: 2k

The other 20k or so went to Vanities, trim (we used good 7" trim board that matched the original trim), waterproofing, permits, finishes etc... 

I guess I could've/should've included this in my original post. 

My other 2 projects I have going right now are closer to $29/sf and $28/sf. 

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