Diary of my 4th flip

49 Replies

So I am going to jump on the diary band wagon and document my 4th flip.  This is my third of this year and 1 last year.

Just got word from my agent that the bank has accepted my offer.  Just waiting for the documents to sign right now.

Purchase Price: $120,000

Estimated Rehab:$20,509  This is my rough estimate based off  my previous flips I will do my final estimate and budget during the inspection period.

Estimated FARV: $179,900

2800 sqft

4 bed 3 bath

Two of the bedrooms are master suites

Expected to be a light rehab with just paint, floor coverings, countertops,etc.  My only concern right now is the previous contract with an owner occupant fell through due to the inspector saying " there are no ducts in the walls".  This caused the lender backed out.  This is a new one to me so I will just have to get in there and see what he was talking about.

Looks like a great house and pretty much just a cosmetic rehab. I can't wait to see your progress!

very nice property 

Good luck with this project

I'm always jealous when I see nice houses like this for so cheap. I would be happy to have a house/yard that size for that cheap. In Baltimore that would be $350k+.

Monitoring this topic can't wait for updates! 

I love threads like this. Thanks everyone who is willing to share how it goes. I am planning on doing my first retail rehab in the next 6 months and will post a similar thread.

Looks good. I haven't ran into the "no ducts in the walls" bit, although sometimes there have been additions that haven't had ducts to them. It's a cost for sure, but it sounds scarier than it is. Of course, that's just with one trunk to an addition, I've never dealt with a whole house before.

@Chris C.  

This sounds like a decent deal. Congratulation. Keep us all posted

How do you find such a good deal like this?

Regards,

Huy

Hey @Chris C.  - can you expand on the "no ducts in the wall" comment? I see a return air vent in the photo with the staircase. I can't see any supply vents in other photos so I assume they are either on the ceilings or floors. 

Sorry if I am just dense and am missing the obvious. 

Thanks

Sorry I have been slow with updates. Got a ton going on but have some interesting twist and turns for you guys. Hopefully today. 

Apparently I was a bit quick to start this thread but it works out in the end.   

I would love to hear other peoples experience with incompetent listing agents and how you have handled problems with them or reported them to the banks they represent.

When I started this thread I had just got confirmation that the bank had accepted my offer and was just waiting on the contract for me to sign.  Upon receiving the contract the sales price was for $122000.  We sent it back and the listing agent told us that he had submitted our offer at $122000 by accident.  $122000 was never offered by either party so how this came to be I am not sure.  He assures us it will not be a problem and he goes back to the bank.  They counter again at $121000 on Friday.  I tell them my original offer still stands.  They contact me on Saturday (who was working at a bank on Saturday) and agree to price but wanted to drop my inspection period from 7 days to 5 days.  I had already scheduled my inspector for Tuesday so this was fine and I accepted.  On Monday I receive the contract but they had changed closing from October 24th to the 20th.  By this time it is late Monday so I cancel my inspector and tell him I will let him know when I get it sorted.  I send the contract back and the listing agent responds to just strike through it and change the closing date.  We do this only to have him tell us the bank will not accept a contract with strike throughs.  We wait on another contract and sign it Monday night.  We do not get a ratified contract from them until today at 1.  That is after I told them that I was rescinding my offer at 5 today.  Guess what day they dated it. Tuesday the 7th.  

Now I have 5 days to get my inspection and my inspector can't get there until Monday night.  To increase my inspection time I will be requesting a price reduction for $10,000 for the duct work issue.  This will not only give me 3 more days it will also allow me to aggravate them a little and negotiate in case we find anything unexpected.

@Huy N.  The HVAC system is interesting.  Outside is a gas pack and a heat pump as seen in the pictures.  The gas pack has ducts that run through the ceiling downstairs and the floor upstairs.  The heat pump is ducted in the ceiling of the upstairs.  Where the gas pack return enters the house is behind the downstairs bath tub.  A return is cut in the interior wall also accessing this space behind the bathtub with a return grill and filter.  So the area behind the tube is a large vacant area  where the air is pulled from.  No duct work.  I will try to take a picture next time I am over there.

Here is a preliminary budget that I will keep updated.

Here is a picture of the "ductless" return.  What you see in the wall is actually the back of a fiberglass tub.

yuk, on the "no duct in the wall".  :)

Originally posted by @Chris K.:

I'm always jealous when I see nice houses like this for so cheap. I would be happy to have a house/yard that size for that cheap. In Baltimore that would be $350k+.

 In my area  (San Francisco Peninsula) it would be close to 2M.  ($700 per square foot).   So dont feel too bad.

@Chris C. -Thanks for posting this detailed information. Am I missing something, or does your budget reflect a decision to leave the kitchen more or less as is? The kitchen looks perfectly clean and functional, but the cabinets and countertop would look a little outdated in my mid-Atlantic market (Baltimore-Washington area). If you were planning to rent the house after rehab you might keep it that way, but for a resale in my market you would get higher dollar if you upgraded them. I'd be interested to understand your reasoning. 

Also, as a licensed realtor myself, I'm not surprised at the shenanigans you've run into while trying to ratify the contract. Most banks accept cross-outs in the contract if all parties have initialed them. If there get to be too many changes, or the changes are very major (unlike a $2K price adjustment) then you may need to submit a clean copy of the contract that incorporates all the changes. So, okay, you know you are dealing with a conniving seller and an incompetent (or worse) listing agent. I hate to see that but it's not uncommon. Stay alert and stick to your guns. 

@Chris K. -Where in Baltimore are you seeing houses like this that cost $350K? I grew up in Baltimore and do all of my real estate work there, and I'd be surprised to find such a high price tag on this house in the area. But I'm also the first to acknowledge that I still have much to learn, so would appreciate whatever you can tell me. 

Is that a pass-through from the family room (the one w/ a fireplace) to a bathroom?? What is up with that?

@Nancy Roth  Thanks for the feedback Nancy.  I am updating the counter tops and repainting all the cabinets.  The line item in my budget is for standard off the shelf counter-tops my handyman installs from Lowes.  Due to the more complicated countertops in this home and the multiple bathroom counter-tops we are having a counter-top company do all the counter-tops.   The additional materials line item is mostly counter-tops.

@Sylvia B.  The pass through is actually to the laundry room that is also configured like a butlers pantry with sink and serving area.  This is in the basement family room and not in the main family room upstairs.

Loving the details Chris!  I hope you're getting good before and then after pictures.  

Thanks for the updates @Chris C.  I'm not familiar with ductless air returns per se but I do understand that you can pump all the cold air into a space that you want but if you're not also pulling hot air from that space it will never really feel comfortable. I'm going to ask my HVAC guy more about these ductless returns as I'm curious about them.

+1 for the education value of this thread. 

Wow, great looking property sold by a bank and not even done rehab yet. Good for you!

Thought I would throw in a little detail about how I fund deals and specifically this one.

I try and fund my own deals but right now I am sitting on a 1000 sf 3/1 next to a busy road that I can't move. Very good lesson in the importance of location.

A co-worker has been investing with me since I begin picking up rental properties and flipping mobile homes. He has now jumped on board with the rehabbing also.

We structure our deals on a promissory note that is not recorded against the property. We do this for a couple of reasons.

  • It saves a little money at closing when we do not have to file a lien/mortgage. It saves even more when we use the selling banks attorney so that they pay attorney and title insurance fees.
  • Another benefit is that he does not have to attend any of the closings which is going to be necessary since he leaves in a few months for a long term contract in Germany.
  • We do not have to pay him the full amount owed at the sell closing. We do a profit split but there are always some insurance andutility bills that come in after closing. We now pay him his principal right after closing. We then pay the remaining balance once all bills etc are accounted for.

It obviously takes a lot of trust for us to structure a deal in this way. He does have recourse but not as secure or clean cut as having a lien.

The profit split is 60/40. I get 60% and all capitol investors get the 40% based on their percentage of total funding. If a deal cost $100k and an investor puts in $80k and I put in $20k then the 40% of profit gets split 80/20. This is more expensive then borrowing from a bank but the flexibility is worth it.

On this particular deal I am also talking with a friend of his that is interested in investing with us. She has some reservations so we are working to make her comfortable which has required a few changes to the contract. Her father is an attorney so his input has actually been helpful.

@Chris C.   Numbers look good!

From the front it looks like it wanted to be a 4 unit, it's a single?

Mike

PS I wouldn't have shown it or details until I closed, you've got hutzpah.

@Mike Hurney  It is a single but it does look like it is broken into 4's from the front.

Yea don't know if anyone else has done one truly live before but sink or swim hope you guys enjoy the show.

Okay looks like we are going to sink.

Inspection came back with nothing out of the ordinary except the HVAC.  Looks like it will need some duct work and probably a new gas pack.  Asked the bank for a price reduction and was flat out denied with no counter.  Listing agent said he is working with one of the most stubborn asset managers he has ever dealt with.  Going to let it go back on the market and I will try to get it at a more feasible price.  

Sorry this could not be a diary of a rehab but maybe some of you got a little something from it.  If I am able to get it back under contract I will continue this post.   Just another day in the life of a flipper.

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