Updated 2 days ago on .
Started as a flip, turned into a nightmare, but still walked away cash positive
Investment Info:
Single-family residence fix & flip investment.
Purchase price: $59,000
Cash invested: $90,000
Sale price: $150,000
This one came with a lot of stress and heartache. The contractor stopped working and his crews did quite a bit of bad work as well as damage to work done earlier in the rehab. My family and I moved out of state in the middle of the rehab and I was not aware of this until it was too late to adjust course. There was enough room in the profit to redo the work and cover holding costs for the extended holding time. I walked away with approximately 1k and a mountain of lessons learned.
What made you interested in investing in this type of deal?
I enjoy flips. I enjoy taking something neglected and beat down, then turning into something shiny and new. I have a strong base in construction, so naturally, flips just fit.
How did you find this deal and how did you negotiate it?
I found this deal on an online auction. I calculated the worst case scenario for rehab and my numbers still worked, so I got it sight unseen. There were little to no bids, so the competition was basically nonexistent.
How did you finance this deal?
This deal was financed with two sources of private money. The purchase (including earnest) was 100% covered on one end, and the rehab was covered 100% on the other end.
How did you add value to the deal?
I paid in sweat equity by locating the deal, creating the scope of work, finding the funding, doing some of the work on the property, and taking full responsibility for the setbacks.
What was the outcome?
Read the description.
Lessons learned? Challenges?
Oh boy did I learn some lessons. My top three are:
1. Always have a contract, never trust in verbal agreements
2. Always have a reliable network to assist when I can't physically be there
3. Never feel sorry for yourself. It helps no-one and allows problems to grow. I despaired and wasted precious problem solving time moping, and as a result, ended up holding the property much longer than I should have.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Not in this case. The agent failed me, the contractor failed me, and the lender does not lend as a profession, he does buy and hold on a large scale and does not use BP. This deal was an exception. I was the point of failure, but I would definitely not recommend anyone who had a hand in this deal.