Finishing 2nd flip - steep learning curve

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Here's the link to my first flip if you feel like reading.  Great profit but did most of the work with the help of my family.  Not exactly the best way to grow a business and my day job suffered because of it.  

http://www.biggerpockets.com/forums/223/topics/140...

I wanted to do another one but because the issues above and I now have a 5 month old son, there was no way I could do the rehab myself.  So I set out to use contractors to do the work for me.  I originally planned to have a friend of mine GC the project as that's what he does for a living.  We talked about some numbers and I THOUGHT I had a good idea where he was going to come in for certain things.  Apparently not.

I get the 2nd house under contract and with a $30,000 rehab budget.  My GC and I start going through the numbers and he ends up around $42,000.  So I take a step back and decide that I'm going to GC the project myself.  Not really knowing where to start with contractors, I put an ad on Craigslist and got about 50 calls/texts/emails within 36 hours.  I had to take the ad down because there was just too much coming in!  I setup about 10 meetings back to back and have all the contractors come in to do walk throughs and provide bids.  I ended up receiving labor bids for the entire project that ranged from $9k to $24k.  

Stupid me.....I take the $9k bid.  They seemed knowledgeable and had their sh*t together.  After 2 weeks of work, I let them go.  The 1 guy was basically working the job part time and the other guy didn't have the experience/knowledge that I was led to believe he had.

I call another contractor that came through during the initial walk throughs and we agree to have him complete the work.  This was the week before Christmas and he asked to start the week of New Years.  I reluctantly said OK because the house had been sitting idle for 3 or 4 weeks now.  Well, he was a no call/no show.

Feeling frustrated and defeated, I call my GC buddy back and ask him to finish it.  He walks through and then I don't hear much from him for almost a week.  He gets back to me and says he has too much going on and gives me the numbers of some of his subs.  They end up not working out either.

Around this time I go to a real estate meeting locally and end up talking with a contractor there about the project.  Him and his partner come over and give me a bid in the range of where I need it to be.  We all agree and they start the work.  They provided a completion date of 2/7/15.  Well, they completed the work on 2/25/15.  We agreed to a $200/week penalty for late completion, which is just my holding costs for the house.

I had my fair share of frustrations with these guys though.  They initially told me they had 5 guys in their crew, well they really had 2 full time guys and 3 guys they used as needed.  So that was a large part of the delay in getting the work completed.  I was also not overly impressed with the quality of the work they did and had to constantly go back and tell them to fix things or do things a different way.  They got it done but its not up to the standards they I would like it to be.  My wife and I will most likely be going over there this weekend to do some final touch up and cleaning.

Its definitely frustrating that the rehab came in at pretty much the same price as what my buddy GC quoted originally.  I could have been completely hands off and let him handle everything and it would have been done MUCH sooner and with a whole lot less hassle for me.  Live and learn I guess......

Purchase Price - $100,000

Materials - $31,060.70

Labor - $12,980.00

Holding Costs - ~$5000

Total Invested - ~$149,040.70

Will be listing the house for sale for $189,900.  Potential profit of ~$27,500 if it sells at full asking price.

Before pictures

https://www.dropbox.com/sh/2977dj0d2x09xdt/AADqpHX...

After pictures

https://www.dropbox.com/sh/vl9nu3belutmnyb/AAANc9r...

Sorry for rambling on.  :-)

excellent work dude!  keep it up.  good luck on the resale.

Patrick Britton, Real Estate Agent in WA (#120557)

@Tim G.  Great work man and way to persevere. Many would have given up when you got up. I suspect your knowledge and experience learned will serve you well and make you wealthy.  I admire your tenacity. Persevere!

Tim, 

After only a month on BP, I'd venture to say that the BP answer to your situation is "better to have a $27,500 deal than no deal at all." We closed on our third investment property this week and I'm already frustrated that despite hiring the architect weeks ago I'm only now seeing schematics to review (we were willing to take on the expense despite not yet owning the house because it would save a lot of time on permitting). But I keep reminding myself that this is our third deal and we're doing things much better than the last time. Congrats on pulling the plug quickly with each wrong turn so that you didn't lose even more $$.  Good luck on the resale. 

@Tim G.  

You know what they say.......

Don't sweat the small stuff, and it's all small stuff... Lol

We all have days or projects like that. Or least I know I certainly do.

Per the others - way to keep on it when it got tough man. That's how you win. NEVER QUIT!!

Its not always about being the biggest and baddest or smartest guy or gal in the game. Really what it boils down to on anything in life is being "enough" of those things at the particular time. It boils down to NEVER QUIT!!! If you decide  to NEVER QUIT, you will always win in the end.

Cheers to everyone who NEVER QUIT!!!

@Tim G.  First off, very nice work on the house - it looks amazing! Sounds like a very tough 3 months. I am hoping that contractor solicitation and selection in general really bubbles to the top of this on BP. I am a do-it-yourself guy, but I have a day job too. There has got to be a happy medium somewhere in there, I am sure you will find it.

You gave a lot of 'looking back' examples,, but I am curious about how you feel 'looking forward' to the next job? Straight GC? You GC the parts you can? What are your plans?

Thanks for sharing yourexperience 

@Tim G. Great job! Did the contractor and his crew learn and improve as time went on, and did you end the project on good terms? I've worked with contractors who initially didn't perform up to my expectations, but because they were otherwise reliable/punctual and trustworthy and charged a fair price, I kept working with them while they got in the habit of doing things the way I wanted. It sounds like you're ready to go back to the well at the local REIA to find a new GC, but in the meantime or in parallel if great deals comes along, the current contractor can help you seize the opportunity.

Thanks for the kind words everyone!  Hopefully it sells quickly!

I did find 1 good contractor in all of this.  2 brothers that did an AWESOME JOB removing all the wallpaper, skim coating the walls, fixing issues in the ceiling drywall and hanging some new drywall.  They also got the entire house ready for paint.  When they finished with all the drywall work, they said they did paint work as well but knew I already had someone lined up for the painting.  I told them I wish they told me that a week ago!  If their paint work was anything like their drywall work, it was going to be amazing!  I've passed their contact info out to a few people I know and have heard good results from them as well.

@Jonathan Key  Going forward, I will do it 1 of 2 ways.  1. I will continue to GC the rehabs.  But instead of hiring a couple "contractors" to do all the work, I will break down the Scope of Work into weekly milestones and hire specific tradespeople to do that particular work for the week.  This is more time intensive but you aren't putting all your eggs in 1 basket with only 1 contractor.

Option 2 is my GC buddy and I get a better handle of how we can work together.  This is the option I would prefer as it will allow me to focus my time on finding new projects instead of GC'ing/babysitting the current project.

@Ken P.  Yea, I guess the job ended on "ok" terms.  I didn't kick them out.....just kinda said OK you're done, i'll take it from here.  There were 2 main guys.....the initial guy I met definitely wanted to do a good job and was doing what he could to correct the stuff I pointed out.  He just doesn't have the experience to know the "trick of the trade" so to speak.  The other guy has being doing this for a long time and he did a good job when he took his time.  But most of the time he just wanted to slam it all together and move on.

Very nice work. Well done. I wonder if it would have been better to open the wall between the stove/microwave and the dining room and then add an island parallel with the sink and make a large open kitchen dining area. Probably could have asked more for the home if that was done. But as always it comes down to cost versus return on investment.

In my area, the more open the space the higher the asking price. I tend to want to open space except where a large beam is required unless it's a full gut and then I strongly consider it as it improves resale value quite a bit and can usually end up in a bidding war which all of us want.

@Rodney Marcantel  I thought about that very early in the process!  The wall isn't load bearing but there is a HVAC return in the wall and some HVAC ductwork in the kitchen soffit.  I did talk to my realtor about it and he said to leave it as is.....looking back though, I wish I would have done it.

@Tim G.   Great job! The "before" pictures looked like the home had great bones. I foresee a family raising their children there before long.  The "after" pictures brought a modern theme to the property.  You persevered through the contractor nightmares, and you will most likely have a nice payday from your good decisions along the way. 
Please follow up on this thread, and let us know when you close and what your after numbers look like.  Again, NICE job and great thread: very sequential, not superfluous, but detailed account of your work.  

Just a quick update.  We listed the house on Friday 3/6/15 at $189,900.  In the first 3 days, we had 8 buyers walk through.  Received an offer on day 4 for $185k + 2500 CC's.  We countered at $187,500 + 2500 CC's and they accepted.  This is contingent on them selling their house.

The buyers are closing on their house 3/26 and are scheduled to close on my house on 3/31.  This seems very quick to me.  But my realtor spoke with the lenders for both transactions and sounds like there won't be any hiccups on either close date.  So that should save me ~$1800 in holding costs over what I had originally estimated.  

Total profit should be right around $24,000.  Time to find the next one!