First Flip Hits Market Today in St Petersburg FL

27 Replies

First...many thanks to the inspiration provided by Bigger Pockets. This site is terrific! We have really jumped in to investing, purchasing 6 rental properties, 4 SFH and 2 duplexes in the last 6 months. Most via our solo 401K. Will report more on those later once I see how they work over a longer period.

This is about our first flip. It's not part of the 401K. We purchased the property in poor condition, unlivable, basically a shell. Originally built in 1927 and located in St Pete's Historic Uptown District. It went through 2 prior major additions, including one in 2004 that was never quite fully completed. A 3/2 with 1380 sqft.

I wish I had good before pictures, but I don't. The house had no kitchen, and only bathtubs in the bathrooms. The renovation included replacing all the windows, new central heat and air, replaced or refinished all the flooring, repainted everything, fixed lots of rotten wood and drywall and did a complete kitchen. New deck and some fencing.

Most everything contracted out to others. Necessary since the 2004 permit had to be reopened and closed.

Wr purchased the property for $77K and I'm still totaling the renovation costs, estimated at around $46K. In round numbers, probably $125K invested. Just listed at $179K. I will update this thread with better numbers when I have them.

Bob

@Bob Ebaugh your flip looks beautiful! I wish I worked St. Pete so I would have a chance to bring lots of buyers by this lovely home.

I have a friend that needs to get off his duff and purchase. Please send me the info.

Beautiful house! Reading your description of the work done, 46K sounds pretty reasonable. I've got rehabs coming out my ears these days and would love to know who you used -- if you're sharing.

Thanks!

Amy

@Amy Davidson Ron Puckett Construction was the GC. Lehmkuhl Electric, Fields Plumbing and Kweller Mechanical were the primary subs. I found most all the subs, most of which had done work for me in the past. Ron picked the drywall guy Sammy, which is all I know him by. Except for the plumber they all are small shops. It turned out to be a great team. The only work completed on a bid was the mechanical.

Thanks! I'm working with Robin Smith Design and Build at the moment, and I like them very much. But I've had so much bad luck in the past with others -- or I've done such a bad job hiring (semantics!) -- that I want to make a little list of highly recommended companies.

Looking forward to reading your post after the house sells!

@Amy Davidson I want to know where you are finding the rehabs. I've sort of been looking for the next one since we bought this one. So far I've not been brave enough to buy at the courthouse steps a house I can't even see the inside of. This was a conventional foreclosure sold outside of Fannie/Freddie, but was listed on the MLS as a cash only sale, listed about 3 days before highest and best where we prevailed.

We have chased 2 others like this, but even at offers 10-11K over asking, someone else paid more. One went at 150% of asking.

It may be the territory, we are restricting our market to St Pete, since we know it well, living here since 1985.

Hi @Bob Ebaugh I use a wholesaler who generally works between St. Pete and Tampa, but he also comes us with interesting things in other areas, too. I like him very much as a person, but I also like him as a wholesaler because he works with another fellow who is always coming up with great creative financing ideas and is like the "seller-whisperer". He can really point out the beauty of seller financing to both parties, and they offer lots of seller financed deals.

I'm going to send you a PM right now with his contact details. If anyone else is interested, let me know and I'll PM you, too.

Amy

@Amy Davidson Thanks for the info!

Your post raises another question, probably a new topic. We own all our properties free and clear. While we understand all the reasons to leverage using OPM, we are a little reluctant until we can figure out the right balance so we could survive a market downturn.

Our motivation is we are close to a point where we will have to do that if we wish to grow. At least at anywhere near the same rate as the last 6 months.

In regards to flips, I think free and clear makes sense if you can swing it since the financing costs come directly out of the profit. For rentals, financing makes sense if you are confident in a rising market. But all the good things about OPM seem to work in reverse with a declining market.

For someone who now has 75% of their net worth invested in real estate, how much leverage is acceptable while remaining very conservative?

The rehab looks great, but one concern. "It went through 2 prior major additions". Were these permitted? If not, this could cause sale and/or tax issues, and must be disclosed.

@Account Closed   That is a good point.   But in this case, the most recent addition was permitted, but never closed.   One of the significant values we added was re-opening that permit, completing the work and getting it properly closed out with the city.   The earlier addition was probably pre 1998, since it does not show on the cities current permitting system.   But the footprint of the house is properly shown on the county property appraiser so it's unlikely to cause a problem.

In general, an update to the status.   In the first week on market, we had a primary full price contract, and a backup, also at full price.  We were all smiles.   But unfortunately both fell through on inspections.   The issues are related to being a original 1927 build in Florida.   I will summarize each one:

Roof -- We chose to repair rather than replace.   It was leaking when we purchased the property, but our best estimate was the last reroof was in 2004 when the latest addition was completed.  My contractor believed it still had some life left and could be repaired.  And now in the rainy season here, it is definitely fixed, and no longer leaking.   But remaining life is a judgement call.

Electrical -- The original parts of the house are wired with two wire ungrounded copper wire.   It is not knob and tube, but it is tinned copper, a real rubber insulator and then cloth covered.    There were many original outlets that had been changed to regular 3 wire outlets, but of course had no ground since there was no wire for it.  We did not really do much to this system on the upgrade, had to add AFCI breakers for the bedroom addition into a modern Square D panel.

Termites -- During the renovation, we noticed evidence of prior infestations, but no live termites.   Unfortunately about the time we hit the market, swarming season arrived, and so did the dry wood termites.   In this part of Florida every older home has had them, without exception.  Tenting is needed every 7-10 years and we knew enough about the recent history of the property that we should have done this as part of the renovation. 

Both of the buyer's inspectors found these issues.  The first withdrew, the second negotiated a price adjustment, but could not obtain property insurance, mainly because the required insurance inspection form was marked "improper grounding" due to the un grounded outlets that showed a ground position, but not connected to ground.

This inspection form, somewhat unique to Florida, is required on any house over something like 30 years old to get insurance.   

We withdrew the property from the market for one week. We replaced the ungrounded outlets with the old style 2 prong outlets, to meet current code. Had an inspector complete the Citizens insurance form and obtained an insurance quote. Both the inspection and quote are now on the MLS. And we have the property scheduled for termite tenting on July 30, the first available date our bug guy could schedule. As a side note, it looks like it's going to be a triple tenting, there are 2 other properties we are having done about the same time.

It's been back on the market for a week now, had several showings and one offer we declined based on price.

What did I learn?   I would do what I just described upfront.   Second, we won't be accepting any more 14 day inspection period contracts.   Those buyers had the inspection, we renegotiated the price, but then took another full week to withdraw.

Will post another update once we have more to report......

Hi@Bob Ebaugh  

Thanks for taking the time with your recent detailed post. I would never have thought to put the inspection and insurance quote on the MLS, but I think it's quite clever. Everything is out in the open is the best way to make sure no one wastes your time going forward.

Looking forward to hearing about a big, fat, sale coming up, and a happy family moving in soon!

Well... an update to this thread....

It closed today at $174,900, basically netted us about 40K.   We feel extremely lucky for a first flip.   I am really uncertain if we can duplicate this one.   We've been looking for a month or more for the next opportunity, and come up with nothing we feel confident about.

My advice based on this one is it will be clear to you, not hazy when you see a flip opportunity.   I saw the original bank listing and said it must be trashed (or a typo) for that price in that neighborhood.   We looked and began to understand why.   But our friend and GC we brought over indicated the issues were mostly cosmetic and could be fixed.   We saw the possibility, worked out a budget, stuck to it, and took a chance.

I hope everyone gets the same opportunity!

Best, Bob

The folks in the St Pete area that made this work for us:

Ron Puckett of Ron Puckett Construction (GC)

Rob Van Stronder of Keller Williams  

David Kweller of Kweller Mechanical (air conditioning)

Jillian Biltz of Urban Upgrades (colors and interior design)

There are many others who helped along the way.   But I wanted to give credit to those who went the "extra mile" to make this work for us.

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