Shingle Springs, CA · Member since 2017 · 24 posts · 119 votes
Hello investing friends! My very first "flip" went live on MLS today. What a great learning experience and it was definitely very different than what I've seen on HGTV. :) Nonetheless I LOVED the process.
Before/after pics attached. It was A LOT of work but the home cleaned up real nice. Now I'm hopeful for a quick sale!
A shout out to Brandon Turner for his book on REI that inspired me to understand the seller's motivations and concerns and then put together a creative offer to address them. That piece of advice helped me to land this deal despite several higher cash offers that were submitted.
Here are some pics along w/my before & after collage.
Real Estate Agent · Teaneck, NJ · Member since 2017 · 4 posts · 2 votes
8y
We are not just investors, we are also problem solvers for people in need. I like the way you assisted the sellers and secured the deal in the process.
Real Estate Agent · Atlanta, GA · Member since 2015 · 295 posts · 117 votes
8y
@Craig Drummond CONGRATS MAN! Property looks fantastic and I wish you the best of luck in the future. I hope to be doing some properties like that SOON. Thanks for sharing.
Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
8y
as you know, it's not a done deal until it closes but it sounds like you are in tune w/ reality. update us when you get an offer and it closes. flip looks good!
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
8y
Great job on the remodel-really good value for the prospective buyer too-maybe a bidding war? Very good location halfway between Sacramento and Lake Tahoe. Nice peaceful feeling inside and out.
I like the way you detailed the departing scenario for the seller and made it so convenient for them to sell to you instead of the next offer!
Thanks for all of the compliments & support! While BP is a FANTASTIC resource I have found that folks rarely post all of the details regarding their rehabs. As a result I spent countless hours trying to piece it all together. For this reason I'll continue to share all of my info & learnings about this project in the hopes of giving back & helping others, as well as soliciting advice for what I could have done better. :)
@Bob Marr - I had the cabinets refinished. They were decent solid wood cabinets and just needed some refreshing.
@Jill DeWit - Wow! You are a WEALTH of information! Thank you! I did actually consider wholesaling the property but since I knew I had a decent margin I felt it would be a good first time flip which would allow me a lot of room for error should something go sideways on me. I am VERY interested in learning more about the various methods for finding off market deals. I love doing research and bargain hunting and can see myself very much enjoying the process. I'll reach out to connect.
@Genta Horton - other than MLS which goes to Zillow, Trulia, Realtor, Redfin, etc. I have several craigslist ads posted in the surrounding areas. Is there something else that you would recommend for promoting the home?
@Andrey Rudenko - I have itemized my costs by room where possible but the data is incomplete. This is due to my contractor's bid not being as itemized as I would have liked. That is on my list to do better next time. Also, I placed a HUGE material purchase from home depot and many following home depot odds & ends purchases which made it difficult to assign to each room. Below are my approximate material costs per room. Labor was included in the overall bid of the contractor.
Item
Material Cost
Demo
$0.00
ExteriorFenceDecks
$620.86
Landscaping
$0.00
RoofGutters
$0.00
WindowsSiding
$0.00
Paint
Contractor to provide paint
Kitchen
$7,508.67
MasterBath
$2,147.78
GuestBath
$1,441.61
InteriorFlooringBedrooms
$6,750.84
Plumbing
$71.76
Electrical
$344.82
@Sergey Tkachev - Hi there! I believe we met at the BP meetup last Fall. I based my ARV on comps in the immediate area at the time. Being my first go at this I was intentionally very conservative. I figured that if the #s worked with my conservative estimates then I would have a high likelihood of success. That said here is my estimate vs. actual. As you can see I was fairly conservative in my initial ARV and the continued & unforecasted appreciation definitely helped offset my cost overruns.
Item
Initial Analysis 10/15/17
Act/Est as of 5/15
(+/-)
Comment
Purchase Price (Act)
$180,500
$180,500
$0
ARV (Est)
$349,000
$395,000
$46,000
Conservative initial ARV. Market appreciation continues to help offset budget overages
Buying Costs
$4,000
$14,267
$10,267
Offered to pay the tax lien in my offer
Holding Costs (8 months - this incl loan i pmt)
$21,869
$25,223
$3,354
Supplemental tax, utility costs higher than expected
Selling Costs
$22,350
$23,550
$1,200
HOA fees drove costs
Total Fixed Costs
$48,219
$63,040
$14,821
Delta largely due to tax lien
Finish Materials
$20,000
$22,924
$2,924
Counters & flooring drove addl costs
Labor / Equip / Build Materials
$47,263
$56,898
$9,635
Contractor costs higher than fcst. Cabinet repairs
Total Repair Costs
$67,263
$79,822
$12,559
Delta largely due to contractor cost
Total Project Cost (Less selling costs & ipmt)
$273,632
$299,812
$26,180
Total Investment
$295,982
$323,362
$27,380
Cost overruns due to tax lien, contractor costs, granite & flooring, some additional misc material costs.
Profit
$53,018
$71,638
$18,620
Final profit TBD once home closes
@Kalyanii K. - Thank you! I put together an investor packet and started asking around family, friends, coworkers to see if anyone was sitting on a pile of cash & was interested in investing in real estate. I did several presentations and finally found a private lender willing to take the plunge. I found it pretty amazing how many people have a lot of cash just sitting in a low/no interest savings account!
@Mark Walker - Thanks! Exactly! I saw this as an opportunity to help solve someone's problem! The previous owner owned the home outright and I told him that he will lose all of his equity if it goes to auction and that I will do everything in my power to prevent that from happening and to make the process as easy as possible.
@Scott W. - You're exactly right! It's too early to celebrate as the deal is not done until it closes. The location is a bit tough on this one and will require the right buyer so I imagine there may have to be some concessions made to get it sold. TBD.
Flipper/Rehabber · Jacksonville, FL · Member since 2012 · 31 posts · 10 votes
8y
Craig, great job on your first flip! I went over on budget and time on my first one as well, but still made a profit. That wouldn't be possible if neither of us did the first important step of any Flip deal, "Buy Right!". Awesome work and I'm sure you'll get a buyer soon. The house looks too good and I'm sure someone will soon fall in love with it! ;)
Flipper/Rehabber · Jacksonville, FL · Member since 2012 · 31 posts · 10 votes
8y
@Jill DeWit I often complicated the same thing you said. While I enjoy the flipping business, I do believe that even though the payouts would be smaller, we could turn deals more quickly and make more annually by wholesaling them instead of taking them on ourselves. Do you mind sharing a few of your strategies of what has been working to find steeply discounted deals in your area?
Rental Property Investor · Atlanta, GA · Member since 2017 · 221 posts · 188 votes
8y
For this being your first slip, you did an amazing job! Congratulations on this success and I wish you MANY more to come!
I love the creativity used in negotiating and closing this deal.
#Itooknotes :)
Real Estate Agent · Forest Park, IL · Member since 2014 · 255 posts · 141 votes
8y
Congratulations on a great first flip! What would you do differently? Specifically, how will you address your general contracting differently in the future?
Shingle Springs, CA · Member since 2017 · 24 posts · 119 votes
8y
@Joseph Konney - thanks! Great question. The finding a good & reliable contractor seems like a tough nut to crack. At least for me right now. In my area the contractors were all very busy and booked up 3-6 months in advance. That was the response from the handful of ~8 contractors (of the 35+ that I called) whom actually returned my call.
I just finished a book called "Long-Distance Real Estate Investing" by David Green and he provided a good recommendation of including both positive and negative reinforcements into the ICA (independent contractor agreement). Specifically, once a timeline is set he recommended adding a week and then asking the contractor, "is there any reason that you cannot realistically complete the project in this timeline?" Since you added a week the answer is usually "no". Then he recommends adding a 5% bonus if they complete the project before the end date (positive reinforcement) and a 5% penalty for each week beyond the end date (negative reinforcement). I'm not sure how this will play in the real world but it's something I'll consider next time.
Also, I had a few learnings along the way that I implemented which helped. I provided a VERY detailed SOW but my contractor would never look at it and as a result he was having to redo work. I started having 2 regular meetings over the phone with him each week on Monday & Friday. These were short 15min meetings that helped a lot to review the work to be done (Monday) and what was completed (Friday) and answer any questions about the SOW. I wanted to avoid micromanaging and approached it more from an improving communication standpoint so that we can both move faster.
Do you have any suggestions when it comes to finding, managing, & motivating a quality GC?
