What did you learn from your first deal?
Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes
What did you learn from your first deal?
Most Popular Reply
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3yIf you are new hire an inspector and contractor to come out and take a look at the property. There is not much the inspector will miss, you should pretty much have a dollar amount for everything that could possibly go wrong. Make sure you add a cushion in your construction rehab.
28 Replies
- Residential Real Estate Broker · Milton, GA. · Member since 2017 · 29 posts · 17 votes3y
Suggest you have an experienced mentor or contractor check out the property with you prior to or during your due diligence period with the Seller to ensure you don't overlook anything major; no surprises is best; little things can be absorbed, major things usually can't be without possibly losing money on the deal. Better to find out ahead of time and don't do the deal if rehab is too costly relative to comps and ARV.
Have some questions about your first wholesale deal, do you have a contact email - please advise. Thanks.
Hampton Logan
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Hampton Logan:
Suggest you have an experienced mentor or contractor check out the property with you prior to or during your due diligence period with the Seller to ensure you don't overlook anything major; no surprises is best; little things can be absorbed, major things usually can't be without possibly losing money on the deal. Better to find out ahead of time and don't do the deal if rehab is too costly relative to comps and ARV.
Have some questions about your first wholesale deal, do you have a contact email - please advise. Thanks.
Hampton Logan
@Hampton Logan Thank you so much for the advice! Have you done your first flip yet?
- Residential Real Estate Broker · Milton, GA. · Member since 2017 · 29 posts · 17 votes3y
No flips yet - what is a contact email for you; have some questions about your first wholesale deal - please advise. Thanks.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
If you are new hire an inspector and contractor to come out and take a look at the property. There is not much the inspector will miss, you should pretty much have a dollar amount for everything that could possibly go wrong. Make sure you add a cushion in your construction rehab.
- Investor · Ashburn, VA · Member since 2020 · 140 posts · 145 votes3y
@Katlynn Teague I agree with @Hampton Logan. I think finding a good/trustworthy mentor that knows your market is a smart play. I was nervous about the unknown, but as I've flipped more and more houses I've realized that there are only so many "moving parts" to a house and even if there are surprises (there always are) it shouldn't tank the deal. We've never done a single home inspection on any house we've flipped. Biggest things to focus on are foundation, septic, well, and those major items. Thinks like plumbing, HVAC, roof, water heater, are not going to kill the deal. Also, everything mentioned there minus plumbing is visible so you can see if they are old and likely need replaced. The only way these would kill the deal is if the deal was super thin. Which leads me to my next point...
Make sure you buy the property right. This is far and away the best advice I can give. The cliche saying "you make money when you buy, not when you sell" is so true. For my first flip, we made every mistake in the book in terms of the renovation and when we listed it for sale; we overimproved the property, made some bad decisions that delayed things, overpriced the home when we listed it, and many other things I'm sure I'm missing. But, we still netted almost $50k because we bought the property right and didn't overpay.
Being ultra-conservative on the ARV is the most important thing. You can get away with messing up every other number, but if you are conservative on the ARV and buy right it'll almost always cure all other errors. My first flip is a textbook example of this. I'd get a good deal analyzer and start looking at deals to get comfortable with things. Hope this helps and best of luck to you!
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes3y
A few notes and lessons learned from my first flip and after having flipped a few dozen houses over the past 10 years..
-It will always take longer than your contractor says it will take
-It will always cost more than your contractor says it will cost
-You should always hire a designer, even if you think you're good at picking finishes
-You should always stage before listing for sale
-Location, location, location is most important. You can change the way a house looks, but you can't change the location.
- Real Estate Agent · Member since 2019 · 569 posts · 257 votes3y
I sent the inspections to Insurance company to see if they would flag anything with the 4 point and wind mit. I always check for wood rot/termites, foundation issues, any structural issues, roof, Hvac, plumbing and electrical then I start to look for cosmetic improvements. I flipped my first deal by myself and referenced my contractor and loan requirements to get the deal done.
- Member since 2021 · 47 posts · 18 votes3y
We do the insurance for many investors that are doing flips. The biggest thing we see is the renovation can take twice as long as expected and is typically more expensive than originally quoted.
- Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes3y
Make sure you are onsite all of the time. Know what is supposed to be done, when it is supposed to be done, and who is supposed to be doing it. No one will care about, or know about the entire scope of what is to be done. Good luck. Keep us informed on how it's going.
- Member since 2021 · 15 posts · 7 votes3y
we are finishing our second flip next week and have our third underway. For us we were not nervous because we didn’t know we were supposed to be! The experience has been a great learning time and the biggest thing I would say is to budget more money and more time than you are thinking. Also buying for the right price is very important. We use a method that works backwards from selling price to buying price to help out. If you are interested I can send you the spreadsheet I came up with. Good luck and stick to it.
- Rental Property Investor · Austin, TX · Member since 2018 · 28 posts · 7 votes3y
@Katlynn Teague if I were you I would join a local REIA where you want to invest and try to partner with someone who has experience.
On my first deal, I simply found the deal brought it to someone in my network, they funded it and we split the profits 50/50.
There are ALWAYS investors looking for deals. Your network will equal your net worth is what I’ve learned.
Good luck out there!!
- Residential Real Estate Broker · Milton, GA. · Member since 2017 · 29 posts · 17 votes3y
Network = net worth : True !! Its not what you know, but who you know.
- Investor · Jacksonville, FL · Member since 2019 · 135 posts · 106 votes3y
Hi @Katlynn Teague -
I agree with @William Harvey that “buying right” should be your priority…by doing so it will give you a margin saftey against all your other risk which you can certainly do things to mitigate …but never completely get rid of.
This is your safety net!My first commercial deal was a BRRRR which involved everything in a flip…except selling it! It was a serious renovation and we went over budget by 20%…6 months later than anticipated and also had hurdles with contractor fraud. With that being said, we still completed the project increasing its value by 400k and now hold a turnkey cash flowing asset.
There are so many things I learned from that deal but here are the top two that may by relevant to your situation..!#1 - don’t try to do everything yourself…so much of the manual labor I justified doing myself at the beginning and although I saved thousands of dollars…I lost tons of time and more important my energy, focus and peace of mind. Of course do what you can…but don’t just look at the dollar figure when trying to justify leveraging someone else! I lost months of productive work on my other projects because my all of my mental capacity was sucked by this deal! …looking back I would of hired people sooner in the process and could of gained 6 months back in rental income which would of offset the cost to hire out because the project finished sooner….
#2 - Do your research on your contractor….this person will make or break you! You don’t know what you don’t know…..BUT it’s so important you TRUST them! It’s so common sense and this was not my first experience dealing with contractors ….someone who was looking out for it…and I still got burned! You live and you learn
Best of luck on your project…keep the community updated as you progress! - 3yJacob SloopBusiness MemberRental Property Investor · Virginia Beach, VA · Member since 2020 · 274 posts · 111 votes
Dont buy an old house.
Dont change the layout.
Get a contractor to walk the property with you.
Know your margins in the area.
Pick a property that's around the median sale price for the area. Don't go too low or too high.
Make sure you understand the costs involved with the hard money if using that.
Its scary the first time but you can do it!
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Eliott Elias:
If you are new hire an inspector and contractor to come out and take a look at the property. There is not much the inspector will miss, you should pretty much have a dollar amount for everything that could possibly go wrong. Make sure you add a cushion in your construction rehab.
@Eliott Elias Thank you so much, are property inspectors pretty easy to schedule?
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Timothy Reed:
we are finishing our second flip next week and have our third underway. For us we were not nervous because we didn’t know we were supposed to be! The experience has been a great learning time and the biggest thing I would say is to budget more money and more time than you are thinking. Also buying for the right price is very important. We use a method that works backwards from selling price to buying price to help out. If you are interested I can send you the spreadsheet I came up with. Good luck and stick to it.
@Timothy Thank you so much! I would love to see your spreadsheet. Congratulations on your flips, I hope they continue to go well. Would love to see some pictures of what you did.
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Jacob Sloop:
Dont buy an old house.
Dont change the layout.
Get a contractor to walk the property with you.
Know your margins in the area.
Pick a property that's around the median sale price for the area. Don't go too low or too high.
Make sure you understand the costs involved with the hard money if using that.
Its scary the first time but you can do it!
@Jacob Sloop Thank you so much!!
- Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes3y
Hi @Katlynn Teague, I will take a different approach. You asked what I learned and I have to say the power to live the life you want... in time. Time is the component that many forget. My first rental is about to turn 5 years old and the rent is twice the cost. Having cash-flowing properties is like having an annuity where you only pay for a small % of it. As equity grows, so does your investment and in my case, we put in less than $5k ( VA Loan house hack). Good luck on your journey and please keep us updated! Also, I see that you are an agent. Take a look at @Beth Traverso's playlist on One Rental at a Time for her story. She is a top agent and investor and she is very open as to how she did it. I think it would be a benefit to learn from her if you can.
- Member since 2021 · 256 posts · 213 votes3y
That everything is figureoutable. I had concerns that no one will rent my property. After posting it on different platforms, I had 30 applicants in 45 minutes.
I had concerns that one of the appliances will break down and the world would end, well in the first 2 years I had dishwashing machine and a washer breaking down.... and I just bought new ones from tenants CF over the years.
I think real estate investing is pretty simple. We just have a lot of information to look at and that confuses us, because us a human beings we want to make the "right decision" , which is just START and do the mistakes so you learn.
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Drew C Grossman:
Hi @Katlynn Teague -
I agree with @William Harvey that “buying right” should be your priority…by doing so it will give you a margin saftey against all your other risk which you can certainly do things to mitigate …but never completely get rid of.
This is your safety net!My first commercial deal was a BRRRR which involved everything in a flip…except selling it! It was a serious renovation and we went over budget by 20%…6 months later than anticipated and also had hurdles with contractor fraud. With that being said, we still completed the project increasing its value by 400k and now hold a turnkey cash flowing asset.
There are so many things I learned from that deal but here are the top two that may by relevant to your situation..!#1 - don’t try to do everything yourself…so much of the manual labor I justified doing myself at the beginning and although I saved thousands of dollars…I lost tons of time and more important my energy, focus and peace of mind. Of course do what you can…but don’t just look at the dollar figure when trying to justify leveraging someone else! I lost months of productive work on my other projects because my all of my mental capacity was sucked by this deal! …looking back I would of hired people sooner in the process and could of gained 6 months back in rental income which would of offset the cost to hire out because the project finished sooner….
#2 - Do your research on your contractor….this person will make or break you! You don’t know what you don’t know…..BUT it’s so important you TRUST them! It’s so common sense and this was not my first experience dealing with contractors ….someone who was looking out for it…and I still got burned! You live and you learn
Best of luck on your project…keep the community updated as you progress!@Drew C Grossman THANK YOU SO MUCH! Going to print this out. I would love to pick your brain a little more if you have some time. Would like to hop on a phone call with you!
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Galen Ikonomov:
That everything is figureoutable. I had concerns that no one will rent my property. After posting it on different platforms, I had 30 applicants in 45 minutes.
I had concerns that one of the appliances will break down and the world would end, well in the first 2 years I had dishwashing machine and a washer breaking down.... and I just bought new ones from tenants CF over the years.
I think real estate investing is pretty simple. We just have a lot of information to look at and that confuses us, because us a human beings we want to make the "right decision" , which is just START and do the mistakes so you learn.
@Galen Ikonomov Absolutely! Thank you so much!
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @Chris Webb:
Hi @Katlynn Teague, I will take a different approach. You asked what I learned and I have to say the power to live the life you want... in time. Time is the component that many forget. My first rental is about to turn 5 years old and the rent is twice the cost. Having cash-flowing properties is like having an annuity where you only pay for a small % of it. As equity grows, so does your investment and in my case, we put in less than $5k ( VA Loan house hack). Good luck on your journey and please keep us updated! Also, I see that you are an agent. Take a look at @Beth Traverso's playlist on One Rental at a Time for her story. She is a top agent and investor and she is very open as to how she did it. I think it would be a benefit to learn from her if you can.
@Chris Webb The power to live life the way I want is the goal. I know it takes time like you said, just being patient is the hardest part. I will definitely take a look at Beth's playlist. Thank you so much!
- Real Estate Agent · Atlanta, GA · Member since 2022 · 352 posts · 219 votes3y
Quote from @William Harvey:
@Katlynn Teague I agree with @Hampton Logan. I think finding a good/trustworthy mentor that knows your market is a smart play. I was nervous about the unknown, but as I've flipped more and more houses I've realized that there are only so many "moving parts" to a house and even if there are surprises (there always are) it shouldn't tank the deal. We've never done a single home inspection on any house we've flipped. Biggest things to focus on are foundation, septic, well, and those major items. Thinks like plumbing, HVAC, roof, water heater, are not going to kill the deal. Also, everything mentioned there minus plumbing is visible so you can see if they are old and likely need replaced. The only way these would kill the deal is if the deal was super thin. Which leads me to my next point...
Make sure you buy the property right. This is far and away the best advice I can give. The cliche saying "you make money when you buy, not when you sell" is so true. For my first flip, we made every mistake in the book in terms of the renovation and when we listed it for sale; we overimproved the property, made some bad decisions that delayed things, overpriced the home when we listed it, and many other things I'm sure I'm missing. But, we still netted almost $50k because we bought the property right and didn't overpay.
Being ultra-conservative on the ARV is the most important thing. You can get away with messing up every other number, but if you are conservative on the ARV and buy right it'll almost always cure all other errors. My first flip is a textbook example of this. I'd get a good deal analyzer and start looking at deals to get comfortable with things. Hope this helps and best of luck to you!
@William Harvey There are so many moving parts. I know you said you never hired an inspector, how were you able to know what needed to be replaced (HVAC, plumbing)? Did you do research and where did you look to know? You're absolutely right, you make money when you buy not when you sell. Thank you so much for taking the time to respond, this was so helpful.
- Investor · Ashburn, VA · Member since 2020 · 140 posts · 145 votes3y
@Katlynn Teague The short answer is that there are a lot of things we will not know since we aren't doing a home inspection. And I want to note that the reason we don't do one is so we can approach a seller and make them an offer that is 100% rock solid with a non-refundable EMD. We don't do it arbitrarily just to take on more risk haha.
In exchange for this we can generally get the property at a lower price than if we had contingencies and hoops to jump through. We still walk the properties and take lots of pictures, so it isn't like we are doing this site unseen. We just forego the home inspection to make our offer more competitive.
Back to how we find out the things needing fixed.....we will have a "fudge factor" in our analysis where we budget for surprises. HVAC is pretty easy....if it looks 15-20 years or older, it likely needs replacing. Even if it works properly, a first time buyer we are selling the house to once flipped will be freaked out when their inspector notes the HVAC is old. So, likely makes sense to just budget for replacing it anyways. The roof is visual too and you can tell if a roof needs replaced or not.
Plumbing and electrical are hidden (unless you tear open the walls) but even if both need fully replaced, which is highly unlikely, you're only looking at $10k or so depending on the size of the house. For our first flip we had to redo all the wiring and most of the plumbing and I believe it was well below $10k.
So even if all surprises amount to $10-15k, the deal should be able to absorb this in my opinion, especially if you have a bit budgeted for it. If the deal can't support it then the deal is probably too thin to begin with.
The only exception here is well/septic. We still will usually get inspections done on these because that is something we deal with less frequently, and can be a much larger expense.
When you walk a property, focus on the obvious stuff like age of roof, water heater, HVAC, and everything else you can see, and then just ask good questions of the seller to try to find out if there is anything underlying. We've never really seen people intentionally covering things up, it is actually the opposite where most sellers give way more info than we needed. Hope this helps!
- New to Real Estate · Canton, GA · Member since 2020 · 29 posts · 16 votes3y
Quote from @Chris Webb:
Hi @Katlynn Teague, I will take a different approach. You asked what I learned and I have to say the power to live the life you want... in time. Time is the component that many forget. My first rental is about to turn 5 years old and the rent is twice the cost. Having cash-flowing properties is like having an annuity where you only pay for a small % of it. As equity grows, so does your investment and in my case, we put in less than $5k ( VA Loan house hack). Good luck on your journey and please keep us updated! Also, I see that you are an agent. Take a look at @Beth Traverso's playlist on One Rental at a Time for her story. She is a top agent and investor and she is very open as to how she did it. I think it would be a benefit to learn from her if you can.
Hey Chris! I am brand new to BP and learning the platform. I checked out Beth's profile. What do you mean by her playlist? Where can I find that? Her investments were awesome to read and review btw! Thank you!
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