Miami Gardens - Lessons Learned on single family Flip
A lot of this may be obvious to some of the readers, but I’m going to mention it anyway.
I own other property in New York and Miami and incorrectly thought that this qualified me to do a flip. Initially, I had thought of buying the property, fixing it and renting it, but now that I have actually spent time and driven around Miami Gardens, I’ve changed strategy to just flip it. Lesson 1, decide in advance your plans for the property. Buy to hold for rents, or buy to flip.
My second and biggest mistake was buying the property without doing an inspection with a GC to understand what my expenses were going to be. In 2017, 3/2 single family homes in Miami Gardens that have been remodeled sell anywhere between 180K and 220K. (Source https://www.realtor.com/soldhomeprices/33054/beds-3)
The family who lived there for 30 years never spent a dollar maintaining or doing any upgrades. Basically, the home looks (inside and out) as it did in the 80s. It was originally built in 1950s and aside from the stove and refrigerator, the kitchen shows that it is from the 1950s.
I met with two contractors. The first one, highly recommended, was nice and professional, two guys, each of them showed up in a brand new – or last year’s -- Ford F150. I try my best NOT to judge people based on what they drive, but I’m human. These two fellows spent over two hours going over everything inside and out; deep conversations in which I actually learned many things. I said I was flying back home the day after and would like a proposal ASAP. The day after I was also meeting contractor #2. I wanted to have both proposals to make a decision, but the another lesson is that proposals come with questions and with assumptions and you should take your time (between 2 and 5 days) to have your questions answered and then make a final decision. I received the proposal and almost had a hard attack. I was expecting something in the 30s or 40s, but they came in at 95K. …. I was going to lose money on this. Doubleshit, what have a done??!! These guys were high end and looked like they hand pick the projects they did and always delivered. I want to do a decent job on this house, but one thing I learned is to build and spend according to what the area supports. Don’t build the Taj Mahal in Miami Gardens because you are not going to get Taj Mahal buyers or Taj Mahal money.
I was so broken by this expensive proposal that I decided I could tackle some of the fixes myself and just hire these guys or another GC, for the tasks that absolutely required a license. So I went to the Building Services division of the "City of Miami Gardens", a very nice building. They were extremely helpful, I sat down with the Spanish guy in the middle window and explained I had just bought a house and wanted to fix some things myself. Of the 10 things I wanted to do, 7 required permits. Of those 7, three (AC, full electrical wiring and plumbing for the bathrooms) required licensed contractors. I could live with that; I thought I could get 4 permits as an "owner builder" (their terminology) and hire out the other 3. Until a supervisor overheard us and asked if I owned the property as a person or under an LLC. I had bought it under an LLC. As an LLC, which she kept referring as an investment company, I was no longer considered for "owner builder" upgrades. I told her I was the sole owner and she said that under an LLC, only a General Contractor could work on the property. I was crushed. As I gathered my papers and got up from the chair, I asked if I could at least remove the old kitchen cabinets and she said "you can't touch anything!" There are so many lessons in that paragraph that my head is still spinning.
The next day I met with Contractor #2. This guy was more reasonable and told me which items to first tackle and what could be done later, once the house passed inspection. He took all the info and will provide a proposal I’m hoping will be around 35K based on the approx. he quoted for the bathrooms. That amount I could live with and many things I will fix myself with my family (garden, interior and exterior paint, cleanup, fence, etc)
In essence, I failed to do my homework prior to purchasing the house. I should have used that time to meet with contractors and to understand what needed to be done (in detail) and what couldn't be done without permits. By the way, I don't oppose the need for permits. I know they are a necessary quality control mechanism. But I just don't like that I can't work on the house because it is under an LLC, even though I am the single-owner of the damn LLC. Any liability protections may end up being negated by the extra expenses I will have. Insurance for the LLC may also be higher.