My first flip

[Eric Mcginn]

I’m under contract on my first flip.
also, this is my first time acting as my own agent. I’m now a licensed California real estate agent and I can do transactions cheap! Side note, hit me up if you need a hand listing or buying! DRE# 02283361

So it’s a cute little house, only thing in town (Chico) for under $300k. But it needs the works. Floors have some saggy parts, same with roof. No hvac, appliances, not even a water heater lol. Plus all the cosmetics inside and out. 
it’s more of a project than I wanted, but it’s the only project in town I can afford. Anything else would be a 30+ minute commute to Oroville or Durham. And I have a 2 and 4 year old and do day care drop off so that would make it tough time wise.
So I’m going for this one. I’m basically going all in as far as cash goes. I do have some rentals I could leverage but prefer not to. 
Fo the Ease and speed I'm doing hard money. Financing costs will be about $12k all in over 6 months including interest. Maybe next time I'll line up a HELOC.

I’m an agent so I save commission on both sides. I’m doing all my own work, basically buying myself a full time job with flexible hours haha. 
Conservative Reno budget is $50k but I’m shooting for half that. 
Sales price will be $130k plus closing costs. 

But ARV is a wild card. The immediate neighbors are horders and involved with drugs. They burnt down their house and rebuilt a shanty shack.
I’m gonna do what I can to limit the visibility. Maybe offer to build some fences for them. 

If not for the neighbor it would be an easy $275k but I’m planing on $225k instead. Break even will be around $200k. I figure if everything goes terribly wrong, it will be a really good lesson and I’ll make my money back at least. 

[Kevin Sobilo]

@Eric Mcginn, a few thoughts:

1. Congrats on getting your real estate license and on getting your first flip project under contract. 

2. I appreciate that you gave yourself a plug for business in your post! I definitely think you should work as an agent actively even if its just a side hustle. 

Many folks would tell you to not bother with an RE license, but you can get experience doing it without putting your money at risk. You get to meet and work with people in the industry in ALL different capacities. It also keeps you engaged and up to date on changing laws, markets, etc. 

3. Project management! There is a principle in project management that basically says that a project is definitely by 3 limiting factors: Time, Scope Of Work, and Money. It further states that if one of those factors is problematic, you can often compensate by making adjustments with the other 2 factors. 

Learn this lesson and apply it often!

4. The first factor from #3 that jumped out at me as being a risk is TIME. You acknowledge your own personal time constraints but also plan to do "all my own work". In addition you are budgeting only 6 months for the rehab and using an expensive hard money loan putting financial pressure on the time. If it takes you 12 months instead of 6, your numbers change a lot. 

Consider that if you can hire some cheap labor to work with you, that it may be cheaper to pay them than to pay the additional interest for the rehab timeframe slipping much longer. 

The EASIEST labor intensive thing to hire out, is probably for a clean-out and demo. No special skills, not much direction required. So, I would at minimum consider hiring a couple guys to work with you on this to get things off to a fast start. 

I would also consider finding someone with handyman skills at least to work with you. Many times you can do a project alone, BUT it might take 2-3x as long trying to do it without a 2nd set of hands. 

5. Scope of Work. This one is HARD. Sounds like you have a "needs everything" house. First thing is I would look hard at the comps. What kinds of things are EXPECTED. 

For example, everyone loves new expensive flooring, but maybe half of your comps have old refinished wood floors that you could do for half the price by renting a sander. These kinds of decisions are important for your scope of work. So, learn your market and what is expected to get the ARV you are aiming for.

6. Money! I would try to narrow down your budget a bit. I am very hands on and I don't think I could do an "everything house" today for $25k even if I did ALL the work myself. 

7. Have you investigated permits. In many places the homeowner can only pull permits for their own primary residence. For an investment property, often you need a contractor to pull permits. In my state becoming a contractor isn't hard, mostly it involves getting proper insurance and registering with the state. 

You don't want to get shut down or fined for not having permits. If you need to get licensed/registered as a contractor to pull permits you may wish to start on that now. Otherwise, you may wish to explore other options as well. 

There are certainly areas of the country where rehabs are done without permits and without concern of that biting you later. If you think that is the case where you are double check and make sure. You don't want to get further into this and then find out you have a bis mess to deal with.