Selling a half flipped house?
Hey everyone, I'm new here and have been pouring over all the forums. Definitely wish I found BP about three years ago before I dug myself into a big hole. Long story short, I purchased a charming victorian in Buffalo, NY that has turned into a nightmare money pit. My intention in purchasing was to brrrr, but after a multitude of unexpected expenses (including an electrical fire) and a contractor that abandoned the job I am absolutely tapped out of funds. Most of the structural work on the home is finished, but all of the finish work needs to be completed as well as some electrical work that I'm not sure will pass inspection.
Should I just sell and take the loss? Are there options for having an outside investor finance the rehab and then split the profit if I sell or hold and rent?
If I do sell what is the best approach (e.g. through and agent or cash deal)? I'm feeling super lost right now and so many mixed emotions after three years of blood sweat and tears trying to get this place up and running. Any and all advice is appreciated.
@Anneliese Kvashay
I was unexpectedly in this position on the deal maybe 12-15 years ago. My new business partner (not for the deal but for our overall business) at the time was able to come in, bring his trusted contractors in and get it fixed up where we sold the property and pretty much broke even. Paid off the probate investor tied to it. Was able to walk away with zero losses and lots of lessons learned.
So unless you have someone experienced and who can come in without the emotions attached (I can tell that there are some), bring their own trusted contractors in and get this done for you (they will need complete autonomy in running the show and getting it done) then yes it probably is good to just go ahead and sell at a loss. And since the person likely won't be your partner per se, maybe you can agree to let them get x amount of dollars from the equity for helping you to get this done.
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@Anneliese Kvashay
You will have to take the emotions out of it and look to sell it. List it with an agent who deals with REO's and these types of
Properties
It will probably go as cash deal. Also list it on BiggerPockets since it’s free and maybe get someone interested.
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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The biggest waste seems to be time. Not looking at the numbers, I would sell it for a loss and make up for it via other projects ASAP.
@Anneliese Kvashay you need to consult with two major players in the area (in no particular order) - James Wangelin (https://www.biggerpockets.com/...) but he's not active on BP forum, and @Matthew Irish-Jones (https://www.biggerpockets.com/..). They both run major brokerages and have construction teams. They should be able to provide indepth knowledge of how to handle the situation.
Are you all cash in this deal up until this point? If yes, it'll be pretty easy finding a hard money or private equity lender to help you bring it to the finish line. And they wouldn't even be looking to split the profit. They'll just be looking for a ~12% return on their money from now until it sells.
(If you do go that route, you will need to forget about all of the people you've been working with who are dragging their feet. Find a good reputable general contractor who can help you wrap this house up in the next couple of months)
@Matthew Irish-Jones - could use your input, please
Quote from @Anneliese Kvashay:
Hey everyone, I'm new here and have been pouring over all the forums. Definitely wish I found BP about three years ago before I dug myself into a big hole. Long story short, I purchased a charming victorian in Buffalo, NY that has turned into a nightmare money pit. My intention in purchasing was to brrrr, but after a multitude of unexpected expenses (including an electrical fire) and a contractor that abandoned the job I am absolutely tapped out of funds. Most of the structural work on the home is finished, but all of the finish work needs to be completed as well as some electrical work that I'm not sure will pass inspection.
Should I just sell and take the loss? Are there options for having an outside investor finance the rehab and then split the profit if I sell or hold and rent?
If I do sell what is the best approach (e.g. through and agent or cash deal)? I'm feeling super lost right now and so many mixed emotions after three years of blood sweat and tears trying to get this place up and running. Any and all advice is appreciated.
Sorry to hear this, this seems like a big challenge.
For the fire did you claim this on insurance? If not is that still possible? I would look into this if you have not, might be able to even submit your invoices on the fixes and get some money back to you, and than continue while you are finding the rest of the cash to complete it.
How far are you away from completion?
What is your equity position now and what is the ARV on it?
All these things I would be running through my head to make a big decision on selling and cutting it, or finishing it up. If there is some meat on the bone for the deal, maybe bring a partner in to see if they can help finish it (getting to be warmer over there so you do not have to deal with delays on weather). You could bring them in, work weeks and weekends to get it all done and list it. In a lot of markets inventory is tight so you might be able to make some money back on the deal depending on your market!
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I work with @Matthew Irish-Jones, who is a Buffalo local Contr and RE guy. He might be able to help you, they have a construction team in-house and do a lot of remodel work.
Quote from @Peter Mckernan:
Quote from @Anneliese Kvashay:
Hey everyone, I'm new here and have been pouring over all the forums. Definitely wish I found BP about three years ago before I dug myself into a big hole. Long story short, I purchased a charming victorian in Buffalo, NY that has turned into a nightmare money pit. My intention in purchasing was to brrrr, but after a multitude of unexpected expenses (including an electrical fire) and a contractor that abandoned the job I am absolutely tapped out of funds. Most of the structural work on the home is finished, but all of the finish work needs to be completed as well as some electrical work that I'm not sure will pass inspection.
Should I just sell and take the loss? Are there options for having an outside investor finance the rehab and then split the profit if I sell or hold and rent?
If I do sell what is the best approach (e.g. through and agent or cash deal)? I'm feeling super lost right now and so many mixed emotions after three years of blood sweat and tears trying to get this place up and running. Any and all advice is appreciated.
Sorry to hear this, this seems like a big challenge.
For the fire did you claim this on insurance? If not is that still possible? I would look into this if you have not, might be able to even submit your invoices on the fixes and get some money back to you, and than continue while you are finding the rest of the cash to complete it.
How far are you away from completion?
What is your equity position now and what is the ARV on it?
All these things I would be running through my head to make a big decision on selling and cutting it, or finishing it up. If there is some meat on the bone for the deal, maybe bring a partner in to see if they can help finish it (getting to be warmer over there so you do not have to deal with delays on weather). You could bring them in, work weeks and weekends to get it all done and list it. In a lot of markets inventory is tight so you might be able to make some money back on the deal depending on your market!
The estimated cost to complete is $80-$150k and the current value is around $200k. ARV around $400k if we use high end finish work. At this point its become such a headache that my inclination is either partner up with someone who wants to take over total control of the reno or just sell and be done with it.
And you make a really good point about the insurance. I haven't been able to get proper documentation about the cost of the fire from the contractor but I am going to focus on trying to track that down from them.
Quote from @Anneliese Kvashay:
Hey everyone, I'm new here and have been pouring over all the forums. Definitely wish I found BP about three years ago before I dug myself into a big hole. Long story short, I purchased a charming victorian in Buffalo, NY that has turned into a nightmare money pit. My intention in purchasing was to brrrr, but after a multitude of unexpected expenses (including an electrical fire) and a contractor that abandoned the job I am absolutely tapped out of funds. Most of the structural work on the home is finished, but all of the finish work needs to be completed as well as some electrical work that I'm not sure will pass inspection.
Should I just sell and take the loss? Are there options for having an outside investor finance the rehab and then split the profit if I sell or hold and rent?
If I do sell what is the best approach (e.g. through and agent or cash deal)? I'm feeling super lost right now and so many mixed emotions after three years of blood sweat and tears trying to get this place up and running. Any and all advice is appreciated.
HI Anneliese,
Sorry this happened to you, but its not uncommon so keep your chin up. I have been here and done this more than once. You would think I would have learned the first time, but sometimes the idea of the opportunity blurs the clarity of the risk.
Here are some options:
1. Yes you can have the rest of the rehab financed. Some construction companies offer financing, I know ours does. It comes with a cost though. Its a a high rate, and you are once again compounding your risk. If you are already underwater this could just add to your losses.
2. I have to assume without asking a ton of questions this is probably best to sell off market. Without getting too much into the weeds, you need a permit for everything in this town. If work was done without it from a questionable contractor you are going to have to discount the price for someone to take on the risk.
The asset itself is probably going to make this decision for you. If the work done by the contractor was not permitted, structural work that was not permitted, no asbestos test, lead test, building permit, etc, etc.... you are going to need to sell at a loss to just get out of it.
If you really are at the finish line and someone just needs to put the finishing touches on, you can explore financing the rehab, or trying to sell at break even or maybe a slight loss.
We know the Buffalo area well. Feel free to shoot me a DM if you want to talk this through.
Hi @Anneliese Kvashay, I'm sorry to hear about your stresses with this project! I'm betting you are in my neighborhood, or just next to it. Definitely connect with @Matthew Irish-Jones (who I see already replied) and James Wangelin if you can, as they would be some of the most knowledgeable folks on here from all aspects of your project.
This is a total long-shot, but I have some friends moving back to town who are actually looking at opportunities like these. They considered everything from buying a city lot and building, to turn key, and everything in between. Projects don't scare them. Shoot me a DM and we can connect. If nothing else, it's another resource.
Good luck!
I live in a historical home. 1925. Great year for wine - and let's leave it there. These are money pits and time takers. And, there comes a time when you have to realize this: Every owner takes a house to the next level. So stop and look at where you have taken the house during your ownership. I bet it's farther than you think. And, it's most likely time to let the next owner - who hasn't had to live through what you have so far - start his/her stab at taking it further. These don't get rehabbed quickly...I'm in 20 years and amazed at what it takes on a routine and regular basis. Being on the national registry makes it even worse. Nothing like old and regulated to ruin a perfectly good day.
So, take inventory of where you started and where you are and take pride in that. And, sell it. There's another you, another me out there. Go find your buyer. It will be easier than you think.
Best...
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Quote from @Patricia Steiner:
I live in a historical home. 1925. Great year for wine - and let's leave it there. These are money pits and time takers. And, there comes a time when you have to realize this: Every owner takes a house to the next level. So stop and look at where you have taken the house during your ownership. I bet it's farther than you think. And, it's most likely time to let the next owner - who hasn't had to live through what you have so far - start his/her stab at taking it further. These don't get rehabbed quickly...I'm in 20 years and amazed at what it takes on a routine and regular basis. Being on the national registry makes it even worse. Nothing like old and regulated to ruin a perfectly good day.
So, take inventory of where you started and where you are and take pride in that. And, sell it. There's another you, another me out there. Go find your buyer. It will be easier than you think.
Best...
Great take as usual, Patricia!
Quote from @Anneliese Kvashay:
Quote from @Peter Mckernan:
Quote from @Anneliese Kvashay:
I would go back get those documents and see if you can recoup some money, it needs to be before you sell so if you can hold it. I would say that would give you some juice to fix it up and get it sold for sure! Maybe you get $40K from insurance and then you only have to put out $100K (this is an example). That means you would reduce your expenses and then put in $100K, let's say it is worth $200K then selling it for $400K, you could recoup the cash and maybe make a little bit with selling fees about $25Kish.
Quote from @Patricia Steiner:
I live in a historical home. 1925. Great year for wine - and let's leave it there. These are money pits and time takers. And, there comes a time when you have to realize this: Every owner takes a house to the next level. So stop and look at where you have taken the house during your ownership. I bet it's farther than you think. And, it's most likely time to let the next owner - who hasn't had to live through what you have so far - start his/her stab at taking it further. These don't get rehabbed quickly...I'm in 20 years and amazed at what it takes on a routine and regular basis. Being on the national registry makes it even worse. Nothing like old and regulated to ruin a perfectly good day.
So, take inventory of where you started and where you are and take pride in that. And, sell it. There's another you, another me out there. Go find your buyer. It will be easier than you think.
Best...
That's a really great way of looking at it. I appreciate your take