Flip gone bad. Need advice please.

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Flip gone bad. Need advice please.

Beau Walsh
Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
So I purchased a condo that I was going to live in flip. I did all the renovations and turned out great even after a few hiccups and came in on budget ($40k). But the hoa voted and passed special assessments to upgrade the building envelope and is doing it in a few sections. The first assessment has already cost me ($25k) and they don't know what the future ones will cost but might be another $30-$40k. This is eaten away at my profit because I now have the unexpected cost and can't price the property at the higher price that I had originally planned cause of the upcoming repairs. I've had two offers and both deals fell apart cause of the upcoming work, and now my agent is wanting me to drop my price again. I'm already at a break even price and if I lower it any more I will begin to lose money. My agent is suggesting that I lower it $30k-$40k and hope for multiple offers( the market I'm in is red hot and am seeing multiple offers on most things and a lot are going for well over asking). That scares me. I have permission to rent it but wouldn't get me around the upcoming $30k+ work coming up . Am I better to cut my losses and call it a learning experience and sell at a loss or hold on to it ? Any advice would be great. Thanks bp
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Bob B.
Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
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I would suggest you cut your losses and move on unless there's a strong reason to believe that the property value will increase like crazy in the near future.  Maybe with the new assessments that might be happen.  A lot of investors make good money on condos but I have stayed away from them for the reasons you stated.

Good Luck

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  • Hal Thompson
    Las Vegas, NV · Member since 2014 · 284 posts · 123 votes
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    Does the condo have a financing option for the special assessment? Some lenders will let you pay in installments. If you can hang on until the work is done, you would be in a better position to sell.

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  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
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    @Beau Walsh I would seriously consider your agents advice. Pricing low and creating multiple offers is a very common tactic in a red hot market. If the offers don't come in where you want, you're not obligated to accept them, however, it's pretty much impossible to raise the price once you've listed it. It's a gamble but it may be the only way to escape without a major loss. How confident are you in your agent and how confident are they that they can create a bidding war?

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    I just want to think everybody for the responses

    @Rick Baggenstoss I estimate the final cost should be about 30 to 50 K more

    @Paul Samia yes unfortunately there's no payment plan except splitting the payment into three equal payments

    @Nick Stango they are going to be redoing this cedar siding and a stack of decks including mine.  The work will begin in September and should take 4 to 6 monthsThe second phase should begin following year and will be completed for another year and they'll be finishing the rest of the building. I'm legal responsible to disclose all this and all my cost as far as I know. And yes, I really hope that everyone on BP can learn from my mistakes so they don't repeat them. 

    @Mike D'Arrigo the unit has been listed since November and I'm worried that even after the three price drops I've already done that all look desperate to Buyers and I'm afraid that the bidding war won't happen because of the length of time on the MLS. I feel like this is the deal because a place sold in November on my floor for $430 K,100 square feet bigger, un renovated and another place upstairs was 600 ft.² bigger and sold for $650k un renovated and my place is listed at $390 everything brand new. so the drop to $365-$375 in my biased opinion would be giving it away but I can't force the market I guess.

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  • Sam B.
    Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
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    @Beau WalshThe Van market is pretty nuts.  It's a bit of a bubble, as I'm sure you would agree and who knows when it will bust.  Oil and other large multi-billion dollar projects that were supposed to be taking off throughout BC and AB have slowed, been postponed or cancelled all together.  And how much longer will the Chinese keep bidding up properties, sight-unseen?

    That said, if you want to hold, AirBnB (or flipkey, etc) would be a viable option to cash flow this property.  A traditional rental or even executive rental would bleed you out, as you mentioned.

    Otherwise, as the others above posted, cut your losses and apply your capital to something that will produce a return.

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  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
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    Originally posted by @Beau Walsh:

    Thanks Angelo, yes I would of loved to flip a house and own one one day, however in Vancouver houses start at over a million for a cheap one. The other day a house sold for two million over asking in multiple offers in Vancouver; needless to say the market is red hot. Which makes my situation even more frustrating.

    Look at the Midwest here in the US.

    Spend the time and establish relationships with partners here and maybe consider a joint venture.

    Ohio, Michigan, Indiana

    Great states with awesome value.

    Thanks and keep the dream alive.

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  • Nick Stango
    Contractor · Temecula, CA · Member since 2015 · 190 posts · 36 votes
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    @Beau Walsh How aggressive is your realtor? It sounds to me like your place is a great deal and should be getting strong offers above your asking price. Are you using a full time realtor with a good track record in your area? Did she do a Brokers open house? Some realtors don't want to spend the time or money it takes to sell a house, they just want to lower the price till it sells. I had a realtor that brought me an offer on my house an hour after I told him I was taking it off the market, he kept making me lower the price till I said that's enough, I'm not selling for that price. He obviously didn't want to work for the sale, he was part time and not as aggressive as I thought he would be. I will never get a realtor without interviewing multiple realtors and who is not very aggressive or not a full time realtor, tell them you want and expect, and that there will be more to come if their excellent at what they do.

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    @Nick Stango this is my second agent for this property as I had to fire the last one for not representing me properly.  I feel he's doing a lot more then the last agent but that said I don't know if he is just getting tried of showing the place when his other properties are as he says selling in a weekend with multiple offers.  But Its really hard to take my emotions and ego out of this and make a sound business choice.  This is what my agent just sent me. To give some context.  

    Thanks for your time on the phone. I wanted to send you the comps again and show you that other than the penthouse sale, the other two sales were at or below $500/ sq ft. Based on this info, that is why those units sold and your unit hasn't sold when taking into account the current building issues.

    Like I said before, in my opinion you have two options. One is to not sell and pay the upcoming further assessments and wait although this will still leave you out of pocket as the market cannot go up that much in the near future to recover those costs. The other option is to drop the price (I suggest we take it off and re list it at a new lower price right away rather than do a price reduction so it shows fresh on MLS).

    I would recommend going between $355,000 to $370,000 as I originally stated in my market analysis. We would either strategize for intentionally underpricing ($355,000) with multiple offers driving up the sales price or price very sharp ($365,000) or with a bit of flexibility and wait and see response ($370,000).

    The way I see it; no matter what, unfortunately you will be taking a bit of a hit whether you wait or sell now but what we do know right now is that the market is a very hot sellers' market which we could take advantage of. Also, if you wait you know for sure the hit will be $30,000 where if you strategize and sell well now, it potentially could be less.

    I know this is a stressful situation and hard decision for you. Ultimately, the road we are on right now is not working and we have to make a change.

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  • Jesse T.
    Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
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    How is the traffic for viewings?  Would your agent be willing to reduce his commission on the re-list that he suggests?  If he can reduce his commission by 1% of the price, you cut your loss significantly.

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    @Jesse T. I'm not sure he's willing to cut his wage and don't really want him to suffer for my  unfortunations.  But I've had a steady stream of people usually 2 groups a week.  And 12-15 groups on open houses.  

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  • Dana WhickerPro Member
    Investor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
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    For those saying the HOA must give some financing options because that big of a hit is just nuts, you've obviously never been in this situation. I had a condo where the HOA hit us with a $24k assessment and they gave 2 financing options - pay it all now or make (3) $8k payments over a 12 month period with the first $8k due now.

    I have a no condo rule for myself mostly due to that one deal.

    Good luck OP whichever way you decide to play it.

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    @Dana Whicker yes agreed if I had a choice I wouldn't invest in any more hoa's.  

    This is my place.  

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  • Nick Stango
    Contractor · Temecula, CA · Member since 2015 · 190 posts · 36 votes
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    If your condo is already priced low at $390k compared to the comps in the area, then your realtor should be telling all his buyers that your condo is a great deal and that they should jump on it before it's gone! Put some pressure on him, don't let him bully you around, your paying him. If you know it's worth $390k then it should sell. IMO I don't think you should give it away just because your realtor wants you too. How long has it been on the market, and are there any other condos similar to yours for sale that you can compare yours too? 

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    @Nick Stango it's been listed since November.  I originally listed for $424k under a different agent.  I've since changed realtors and is now at what I feel is a reasonable price.  However I just got an email a few minutes ago from my agent saying the unit that sold on my floor for $430k is now being put back on the market cause the owner go transferred.  It's now related for $449k.  It's square feet is 866 and mine is 749.  That puts it at $518 per sq ft compared to mine at $522 per sq ft.   Maybe it's my inexperienced but I feel like missing something if he wants me drop it to $360k 

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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  • Chris Vail
    Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
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    Not an expert but this is how I would look at it @Beau Walsh.

    At what price will I get all of my capital back (Break even at this point in time)?

    How much does this price move each month (when you add in holding costs)?

    When the first assessment charge happens obviously your price goes up by 30,000 to get your capital back, but can you sell the place for 30,000 more to recoup all of that cost right away?

    If you list/sell at the lower price your realtor wants to list at, how much do you lose? 

    And if you don't sell at the lower price how much will you lose going forward until you get the price you want?

    Real estate is like just about everything else in a free market the market will pay what it wants to pay not necessarily what you want it to pay, so keep that in mind you may never get the price you want.

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  • Dmitri L.
    Investor · DFW, TX · Member since 2013 · 319 posts · 101 votes
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    If you don't like what people are saying, change the conversation. When you disclose the assessment situation to the buyers, tell them:

    a) the work should improve the value of the property 

    b) knowing that this is happening is a clear POSITIVE! They know up front when it is happening and how much it will cost. Any other similar units they look at are basically a ticking time bomb, since they could easily be hit by an even higher assessment a few months after purchase, at the whim of the HOA power trippers.

    Another thought - can you agree with the HOA to pre-pay the assessment now? You can then add that amount to whatever price the property would sell for now, and the buyer can finance that amount in their mortgage (rather than having to keep it in cash to pay in 1-2 months down the road).

    D

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  • Manuel A.
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
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    Originally posted by @Will Barnard:

    I am about to take a 6 figure loss on a flip so I feel your pain, but realize that it can be made up on future deals.

     How did this happen? I just feel you're quite the experienced rehabber and for it to happen to you would require rather catastrophic circumstances. Something to learn from...

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
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    Originally posted by @Manuel A.:
    Originally posted by @Will Barnard:

    I am about to take a 6 figure loss on a flip so I feel your pain, but realize that it can be made up on future deals.

     How did this happen? I just feel you're quite the experienced rehabber and for it to happen to you would require rather catastrophic circumstances. Something to learn from...

     I don't want to hijack this thread and get off topic so keep an eye out for my posts as I will update all the details in mynthreadvon how this happened. Just be aware that no matter how experienced you, things can go wrong and in this case, almost everything did causing the major loss.

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  • Manuel A.
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
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    Originally posted by @Will Barnard:
    Originally posted by @Manuel A.:
    Originally posted by @Will Barnard:

    I am about to take a 6 figure loss on a flip so I feel your pain, but realize that it can be made up on future deals.

     How did this happen? I just feel you're quite the experienced rehabber and for it to happen to you would require rather catastrophic circumstances. Something to learn from...

     I don't want to hijack this thread and get off topic so keep an eye out for my posts as I will update all the details in mynthreadvon how this happened. Just be aware that no matter how experienced you, things can go wrong and in this case, almost everything did causing the major loss.

     Will do!

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  • Dmitri L.
    Investor · DFW, TX · Member since 2013 · 319 posts · 101 votes
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    Forgot to tag the OP in my reply above

    @Beau Walsh

    How is this going?

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  • Rejean Julien
    Investor, Landlord and Entrepreneur · Phoenix, AZ · Member since 2010 · 27 posts · 15 votes
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    -removed-

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
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    So I think I've decided to wait one more week before going a head with a price drop. My reason is with the new unit in my building being listed this weekend, is $60k more then mine and it not being renovated it will make mine more attractive. I have already seen an increase in showing request. So if still no offers after this week I'll proceed to drop it to $375k and cut my losses.
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  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
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    cut your losses and move to FL or the midwest. not being snarky...good luck with the situation!!

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  • Tanya Braun
    Real Estate Agent · Vancouver, British Columbia · Member since 2015 · 32 posts · 11 votes
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    @Beau Walsh

    We are in almost the same boat right now with our condo in Port Moody.

    We bought a few years ago and were expecting an assessment of about $10,000 to come up but it's turned into around $40,000.

    I don't have any advice to offer but just wanted you to know I feel your pain! We actually can't sell now because we would lose about $60,000. Hoping the ARV brings us back up and sadly relying on appreciation in the area as it's near the new transit line.

    vancouver is such a hard market. Mistakes here are expensive! We're kind of lulled into this false sense of security here.

    Good luck to you. It is a beautiful place.

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  • Beau Walsh
    OP
    Vancouver , British Columbia · Member since 2014 · 28 posts · 5 votes
    11y

    thanks everyone for the replays and keep you all posted.  

    @Tanya Braun thanks for the support, I feel you will get a boost in the tri city area when the sky train is finish, hopefully it's enough to get you out of your sistuation.  

    @Will Barnard  I too look forward to hearing your story. I'm stresses enough losing a relatively small amount of money, I couldn't  imagine how much stress you have if its over six figures.  

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