Worst FIRST FLIP: LOST OVER 100k

106 Replies

@KIran Kaur

Thank you for sharing. I am curious how do you like your experience working as a loan officer would you recommend it? I am fairly new in real estate in Sacramento area and I am looking to get as much experience as possible through work or helping other investors!

Very brave of you to share this experience. These forums are a great place to seek wisdom, but they are not the same as real experience. Newbies, be careful. We stand on the brink of another huge recession. There will be opportunities, but the experienced investors know what to look for. Consider partnering or passively investing with an experienced investor until you are ready.

Great story and thanks for sharing OP.    Impressive to pick your self up and try again at it!

We recently picked up a home that was rehabbed about 80% of the way, but the exterior was not completed and thus didn't appeal to that majority of home buyers.  We got a good deal, but Closing day was a nightmare w/ the Seller threatening to walk away from the entire transaction.  


Lessons learned are a tough part of life, but I'm confident you will grow from here.  Best of luck !

Sorry to hear that you went through this but happy you learned from the experience. Will definitely keep what you went through in mind as I get started in my journey. 

Klran,
Also sorry you paid for a very expensive lesson. Need to understand:
Your purchase price       350
Your rehab costs             50
Projected sales price     415

If the above is correct, it's WAY to thin. A lot of the rehabers want $30k min or 20% of the ARV (hopefully the sales price) before going in... including all costs, holding, financing, etc., etc.
As for just getting the wrong contractor, that sucks, and I'm sure you'll qualify the next one a LOT better. Even consider splitting things up... hire one guy for overall, might clean up any construction, new doors, kitchens, baths, etc. Perhaps another guy for the floor, another for the paint.  More work on your part, but more control.
Have a clause that you can fire for any reason. Have a penalty clause for late or poor performance. (but have a bonus for good performance). Get references, look at their license and insurance.
You probably know all of this now.
I love to rehab and flip, but don't do it anymore as I just don't need it. But there's a satisfaction of a good job done and a healthy check in the bank.

Originally posted by @Kent Leach :

Very brave of you to share this experience. These forums are a great place to seek wisdom, but they are not the same as real experience. Newbies, be careful. We stand on the brink of another huge recession. There will be opportunities, but the experienced investors know what to look for. Consider partnering or passively investing with an experienced investor until you are ready.

Yes, there were 900k jobless claims last week. 

 

@KIran Kaur   One suggestion for anyone in this situation.  Rather than give it to a wholesaler, list it with a Realtor.

Wholesalers make their money by marking up your property and selling their contract to another buyer.  That means that you could also have sold it at the same price to that same buyer. 

By exposing the property to a MUCH wider audience through the MLS, it's highly likely that you would have found someone to pay more.

Just because a property isn't up to VA/FHA/USDA standards doesn't mean it's unsalable. It just means that a buyer can't use those loan programs. But there are other loan programs out there - conventional (all major systems have to function), hard money, portfolio lending and FHA 203(k) rehab loans.

You could minimize your losses by going this route.  Maybe even turn a profit.

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